The largest cryptocurrency Bitcoin has rebounded strongly from the bottom to hit the $23,000 mark. So does this mean the start of a bull market?
Well, Glassnode in its latest weekly “on-chain” Report On August 1st, some insight into this narrative was given. The report assesses whether current market momentum is a vote on a bear market rally.
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According to the report, Bitcoin needs to do more to escape the looming bear trap.
The number of active addresses in BTC remains within the well-defined downtrend channel in the chart below.
Source: Glassnode
Notably, the October-November All-Time High (ATH) reached a significantly lower peak than the April 2021 ATH. Therefore, it indicates that there has been a significant churn of users, and the demand has not fully followed up.In this regard, the report assertion,
“Aside from some spikes in activity during major capitulation events, current network activity suggests that the influx of new demand remains minimal.”
Glassnode in the chart notes that this is a “low bear market demand profile” that has basically been in effect since December of last year.
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Two other metrics paint a similar sketch – namely the number of transactions per second and the total transaction fee.
Generally, bull markets will show higher expense ratios. However, this is certainly not the case here. The chart below shows that fees have not risen significantly. Here, on-chain transaction fees are firmly in bear market territory, with total fees paid at just 13.4 BTC per day.
For context, when the price hit ATH in April last year, the daily network fee was over 200 BTC.
Source: Glassnode
Even demand for on-chain transactions has dried up, similar to the one built up during 2018-2019.
After initial write-offs and demand destruction in May 2021, trading demand moved sideways to slightly lower. It was barely able to overcome the aforementioned knockout last year.
Source: Glassnode
Glassnode said that in the above-mentioned scenario, “only a stable base of traders and investors of conviction remains.” Overall, the report concluded that,
“From an on-chain activity perspective, the Bitcoin network is still dominated by HODLers, but so far, there hasn’t been any notable return of new demand.”
Having said that, one area that does see a ray of sunshine is the BTC Lightning Network (LN). These channels continue to hit all-time highs.
Source: Glassnode
Additionally, despite the prevailing bear market, LN’s total public capacity reached 4,405 BTC, a 19% increase over the past two months.
