Holders accumulate, blockchain activity decreases in both Bitcoin and Ethereum

In bear markets, holders accumulate and show unwavering faith. The other side of that is a decline in the “willingness to spend” or use the assets. The latest Intotheblock report “highlights the divergent pictures between on-chain demand and accumulation of the two largest cryptoassets.” Some people still have trouble admitting that we are currently in a bear market, but the signs are everywhere.

Why would you want to move your money if your goal is to accumulate? It does not make sense. The whole situation that Intotheblock describes makes all the sense in the world.

Signs that blockchain activity is waning

According to the report, this month had “the lowest activity in the chain in many years.” Let’s examine the indications that Intotheblock identified and then we will come to holders and their need to accumulate.

• “Bitcoin and Ethereum network fees hit multi-year lows.”

This is one of the clearest and easiest to determine indicators. Especially in Ethereum, since that blockchain’s main characteristic is that fees rise with usage. At the moment, the NFT market is outdated and the DeFi activity is not what it used to be. In addition, it seems like a good time for holders to collect what they can.

• “Network fees paid to use Ethereum hit two-year low.”

Since the controversial EIP-1559 passed, Ethereum burns a portion of the gas fee from each transaction. If people don’t use the network as much, the burning is reduced, but the issuance remains the same. “At these fee levels, Ether would be inflationary even after the merger’s 90% issuance reduction,” informs Intotheblock.

• “Bitcoin recorded modest outflows from centralized exchanges, while Ether saw relatively larger amounts of nearly half a billion withdrawn.”

This indicator is usually called “Exchanges Netflows” and refers to “the net amount of inflows minus outflows of a specific crypto-asset entering/exiting centralized exchanges.” Both bitcoin and ether are flowing out of exchanges and into cold storage, “a pattern that had occurred in previous bear markets.”

ETH price chart for 08/29/2022 on Coinbase | Source: ETH/USD on TradingView.com

Holders are accumulating, is it because the merger is coming?

The transition from Proof-Of-Work to a Proof-Of-Stake consensus mechanism will be a monumental change for the Ethereum network. Crypto people are clearly interested in the merger, in fact it was the main driver of ether’s recent high performance. However, the rest of the population seems to be unaware of it.

• “New Addresses Created on Ethereum Hit Lowest Levels Since 2020 Ahead of DeFi Summer.”

New users don’t know about the merger, so they aren’t flocking to Ethereum to try and cash in on the highly anticipated transition. Or flows to Ethereum in general.

• “Despite the upcoming milestone, relatively few people are searching for Ethereum.”

While holders are rallying, search intent for “ethereum” is as low as all the other indicators. This is not necessarily a bad sign, after all we are in a bear market. This speaks of the low importance the merger has for the general population.

Holders accumulate in a big way

Why does Intotheblock’s report focus on ethereum in the “blockchain activity reduction” section and on bitcoin in the “holders accumulate” section? It’s curious to say the least. “The consistent accumulation in bear markets reflects the strong commitment and long-term conviction many owners have in crypto,” the report said. Although the data they retrieved only pertains to bitcoin.

• “Hodler’s Balance Hit New High of 12.92 Million BTC.”

That’s right, an ever-increasing number of BTC is in the hands of high-conviction individuals. The implications this could have on the future price of the only scarce coin cannot be overstated.

• “60% of all Bitcoin is now owned by addresses that have been holding on for over a year.”

Another statistic, same message. Holders flock, but bitcoin hodlers are a different breed. Many of them seem to be in on this trade. How will this affect bitcoin’s price as supply continues to decrease with halving after halving?

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