Drop in Bitcoin Network Activity Suggests Longer Bear Market: Glassnode

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With several on-chain metrics for Bitcoin (BTC) still in bearish range, a continuation of the recent price recovery will require greater demand and higher costs across the network, Glassnode says.

The assessment of mediocre market growth over the past week came from blockchain analytics firm Glassnode in its latest The Week On Chain report on August 1.

In it, analysts pointed to sideways growth in transaction demand, active Bitcoin addresses remaining in “a well-defined downward channel” and lower network costs as reasons to dampen investor excitement over the 15% spike in BTC price over the past week. . However, according to CoinGecko, BTC is currently down 2% in the past 24 hours, trading below $23,000 to $22,899.

The report begins by highlighting the characteristics of a bear market, including a decline in on-chain activity and a rotation from speculative investors to long-term holders. It suggests that the Bitcoin network still exhibits each of these traits.

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Glassnode wrote that a decline in network activity can be interpreted as a lack of new demand for the network from speculative traders about long-term holders (LTHs) and investors who have a high degree of conviction in the network’s technology. The report states:

“With the exception of a few activity spikes higher during major capitulation events, current network activity suggests there is still little influx of new demand.”

Unlike last week when a significant level of demand appeared to be approaching the $20,000 level for BTC and a bottom was created, the additional demand needed to support further price increases is unobservable. Glassnode refers to the steady decline in the number of active addresses as a “low bear market demand profile,” essentially in effect since December of last year.

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In the analysis, similarities were observed between the current network demand pattern and the pattern observed in the 2018-2019 period. As with the previous cycle, network demand dried up after the all-time high in April 2021 BTC price. There was a notable recovery in demand leading up to November, as prices recovered to a new ATH.

However, since November last year, demand has been on a downward trend, with a major drop during the massive sell-off in May.

“The Bitcoin network continues to be HODLer dominated and so far there has been no significant return of new demand.”

Glassnode added that poor demand from anyone other than dedicated Bitcoin enthusiasts is pushing network charges into “bear market territory.” For the past week, the daily charges were just 13.4 BTC. By contrast, when prices hit ATH last April, daily network charges were 200 BTC.

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Assuming fees rise at a remarkable rate, Glassnode suggests this could mean demand picks up, supporting a further “constructive structural shift” in Bitcoin network activity.

“While we haven’t seen a notable rise in fees yet, keeping an eye on this metric is likely a signal of recovery.”