Active Bitcoin Addresses Stay Low, Rally Unsustainable?
Data shows that the active Bitcoin addresses have not increased significantly recently, indicating that the current rally may be unsustainable.
Bitcoin Active Addresses (30-day MA) stalls despite rally
As an analyst in a CryptoQuant post pointed out, the previous BTC rally saw the metric increase in value. The “active addresses” is an indicator that measures the daily total number of Bitcoin addresses involved in transactional activity on the chain.
The metric stands for both senders and receivers and counts unique addresses. This means that if an address has made several transactions during the day, it will still only be included once.
When the indicator is high, it often means that many addresses are participating in network activity. Such a trend means that the blockchain attracts traders and market participants.
On the other hand, low values suggest that there are not enough active users on the network, which may indicate that the general trading interest around the cryptocurrency is low.
Now, here is a chart showing the trend in the 30-day moving average (MA) of Bitcoin active addresses over the past few years:
The 30-day MA value of the metric seems to have been mostly moving sideways in recent days | Source: CryptoQuant
As shown in the graph above, the quant has highlighted the relevant pattern visible during two previous instances where Bitcoin was in a recovery state. During the 2019 rally and the reversal of the 2020 COVID-19 crash, the 30-day MA BTC active addresses saw an uptick.
This means that as the price rose in these cases, so did user activity, showing that demand returned to the cryptocurrency. This increase in activity helped to keep the respective price rallies going and sustained.
Regarding the recovery from the COVID-19 crash, user activity also continued with a few more increases later, eventually building up to the bull run of 2021. The current scenario is more similar to the 2019 rally, as that price rally also took place when the coin apparently recovered from a bear market.
Since the current rally has formed, there have been no noticeable increases in the 30-day MA Bitcoin Active Addresses, suggesting that demand for the coin may not have changed despite the price increase.
The “price” of an asset is determined by the laws of supply and demand in the market. Crypto markets are no exception,” explains the analyst. “For asset prices to rise, market interest and demand must be supported.”
Unless the active addresses see a sharp rise in the coming days, the rally may not be sustainable if the pattern followed in recent instances is anything to go by.
BTC price
At the time of writing, Bitcoin is trading around $24,700, up 15% in the past week.
BTC moves sideways | Source: BTCUSD on TradingView
Featured image from Maxim Hopman at Unsplash.com, Charts from TradingView.com, CryptoQuant.com
