Bitcoin Active Addresses Stay Low, Rally Unsustainable?
The data shows that Bitcoin’s active addresses have not increased significantly recently, indicating that the current rally may be unsustainable.
Bitcoin Active Addresses (30-Day MA) Stall Despite Rally
As one analyst pointed out in a CryptoQuant post, past BTC rallies have seen the metric rise in value. “Active addresses” is an indicator that measures the daily total number of Bitcoin addresses involved in some on-chain transaction activity.
The metric considers senders and recipients and counts unique addresses. This means that if an address has made multiple transactions throughout the day, it will still only be included once.
When the indicator is high, it usually means that many addresses are participating in some network activity. Such a trend implies that blockchain is attracting traders and market participants.
On the other hand, low values suggest that there are not enough active users on the network, which could indicate that the general commercial interest around the cryptocurrency is low.
Now, here’s a chart that shows the trend in the 30-day moving average (MA) of active Bitcoin addresses over the last few years:
The 30-day MA value of the metric seems to have been mostly moving sideways in recent days | Source: CryptoQuant
As displayed in the chart above, the quant highlighted the relevant pattern visible during two previous instances when Bitcoin was in a recovery state. During the 2019 rally and the 2020 COVID-19 crash pullback, the 30-day MA BTC active addresses saw an uptrend.
This means that as the price rose in these cases, user activity also increased, showing that demand was returning to the cryptocurrency. This increase in activity has helped to keep the respective price rallies running and sustained.
In the case of the recovery from the COVID-19 crisis, user activity also saw some more increases later on, culminating in the 2021 bull run. The current scenario is more like the 2019 rally, as this price increase also occurred when the coin apparently rebounded from a bear market.
Since the current rally formed, there have been no noticeable increases in active 30-day Bitcoin MA 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 active addresses see a sharp increase in the coming days, the rally may not be sustainable if the pattern followed during previous instances is anything to go by.
BTC price
At the time of writing, Bitcoin is trading around $24,700, up 15% over the last week.
BTC moves sideways | Source: BTCUSD on TradingView
Featured Image of Maxim Hopman at Unsplash.com, Charts by TradingView.com, CryptoQuant.com