Drop in Bitcoin network activity suggests longer bear market: Glassnode

With several on-chain metrics for Bitcoin (BTC) still in bearish ranges, the continuation of the recent price recovery will require increased network demand and fees, Glassnode said.

An assessment of the mediocre market growth over the past week comes from blockchain analytics firm Glassnode in its latest The Week On Chain Report August 1.

In it, the analyst noted that sideways growth in transaction demand, active bitcoin addresses still in a “well-defined downtrend channel,” and lower network fees are all to ease investor excitement over the 15% surge in BTC prices over the past week. reason.However, BTC is currently down 2% over the past 24 hours, trading below $23,000 to $22,899 according to to CoinGecko.

The report begins by highlighting the characteristics of a bear market, which includes a reduction in on-chain activity and a rotation from speculative investors to long-term holders. This shows that the Bitcoin network is still exhibiting each of these characteristics.

Glassnode wrote that the drop in network activity could be explained by a lack of new demand for the network by speculative traders, rather than long-term holders (LTH) and investors with a high degree of belief in the network’s technology. The report states:

“Aside from some spikes in activity during major capitulation events, current network activity suggests that the influx of new demand remains minimal.”

The additional demand needed to sustain any further price gains is unobservable compared to last week’s massive demand for BTC that appeared to build at the $20,000 level and create a floor. Glassnode refers to the steady decline in active addresses as a “low bear demand profile,” which has largely been in effect since December.

The analysis observed similarities between current network demand patterns and those established during 2018-2019. Similar to the previous cycle, network demand dried up after the BTC price hit an all-time high in April 2021. As the price recovers to the new ATH, demand picks up significantly before the following November.

However, demand has been trending down since November, with a sharp drop during the massive sell-off in May.

“The Bitcoin network is still dominated by HODLers and so far, there hasn’t been any notable return of new demand.”

Glassnode added that low demand from anyone other than dedicated Bitcoin enthusiasts has forced network fees into “bear market territory.” Over the past week, the daily fee was just 13.4 bitcoins. By comparison, when the price hit ATH in April last year, daily network fees were over 200 BTC.

related: Bitcoin bulls defend $23,000 amid warning bear rally is ‘well alive’

Assuming the rate rises to any noteworthy extent, Glassnode said this could mean demand is rising, helping to sustain a further “constructive structural shift” in Bitcoin network activity.

“While we haven’t seen a significant rise in fees, keeping an eye on this indicator could be a sign of recovery.”