Bitcoin chain demand is rising, but slower than previous cycles
On-chain data shows that demand for Bitcoin has returned recently, but the increase has been slower than what previous cycles saw at a similar stage.
Bitcoin Active addresses have not grown much lately
As pointed out by an analyst in a CryptoQuant post, market activity changed quickly after the bottom formed during the previous cycles. The relevant indicator here is the “active addresses”, which measures the daily total amount of Bitcoin addresses participating in transactional activity on the chain.
The metric only measures unique addresses, meaning that if an address participates in multiple transfers in a single day, it is still only counted once. The indicator also takes into account both senders and receivers in this measurement.
When the value of this metric is high, it means that a large number of addresses are transacting on the network right now. Such a trend suggests that the cryptocurrency is actively attracting users to trade on the chain at the moment.
On the other hand, low values mean that not many users are currently making transfers on the blockchain. This type of trend may indicate that demand for the asset is currently low.
Now, here’s a chart showing the trend in Bitcoin active addresses over the last few years:
Looks like the value of the metric hasn't moved much in recent weeks | Source: CryptoQuant
As shown in the graph above, Bitcoin’s active addresses had come down to a relatively low value during the bear market, but recently some improvement has been recorded in the indicator.
In bear markets, the price usually consolidates indefinitely, so not many users find the coin that interesting to trade. During volatile moves, however, investors rush to act, therefore the calculation may show elevated values.
A recent example of activity suddenly returning like this can be seen around the time of the FTX collapse on the chart. When the price started to move sideways again after the crash, the active addresses also went down again.
The calculation has seen some increase with the recent rally in the price of Bitcoin, but the increase has still not been too significant. In comparison, activity in the 2018-2019 cycle quickly picked up after the bottom formation in the bear market.
The quant has also attached the annual active address detrended price oscillator (DPO) to better illustrate the difference between the current and previous cycle. As is visible in the graph, the trend in DPO is showing only early signs of the bear market exit so far in the current cycle.
“At this point, off-grid fears could affect full demand returns and delay a sharper improvement of basic grids,” the analyst explains. “The understanding of a possible turbulent year in terms of macroeconomic conditions has not yet enabled a sense of greater risk appetite and investors remain cautious.”
BTC price
At the time of writing, Bitcoin is trading around $23,700, down 1% in the past week.
BTC has declined recently | Source: BTCUSD on TradingView
Featured image from Dmitry Demidko at Unsplash.com, Charts from TradingView.com, CryptoQuant.com
