The data shows that while Bitcoin’s price is skyrocketing, on-chain activity has not improved much over the past week. What could be the reason for this behavior?
Bitcoin breaks $ 50,000 but activity lags behind
According to this week’s edition of the Arcane Research report, activity in the chain appears to be slowly recovering despite the high price of the cryptocurrency.
The metric used here to measure activity is the indicator of the average number of active addresses of Bitcoin over 7 days, which, as the name suggests, indicates the number of addresses on the network that have seen transactions within a given period of time.
Now here is the graph for the BTC number of active addresses (7 day average) versus price:
Bitcoin's activity seems to be lagging behind the price | Source: Arcane Research
Looking at the graphic above, two things become obvious. First, the number of active addresses is currently just under 900,000. This shows that the indicator has certainly bounced back from the lows of around 750,000 after the price crash.
Second, while the price of Bitcoin has now risen to around $ 50,000, the activity has not yet shown such a large increase. Active addresses are still at the same level as they were in summer 2020 when the price was around $ 10,000. During the bull rally early in 2021, the value of the same metric topped 1.2 million.
Related reading | “Buckets of addresses” piling up Bitcoin suggests that a rally above $ 50,000 is sustainable
The question now is why is the indicator lagging behind the price this time? There could be two possible explanations for this trend.
The first is that the low number of active addresses could be a bearish signal. Investors may not be very interested in Bitcoin right now, so they haven’t made their investments yet.
The other reason is that more and more investors are viewing BTC as a store of value so they have no reason to move their coins. This would send a bullish signal to the market as there are now more long term holders on the network.
What’s next for the price of BTC?
At the time of writing, Bitcoin is trading around $ 48,000, up 5% over the past 7 days. In the past month, the cryptocurrency has accumulated 40% in profits.
Below is a chart highlighting the trends in BTC price over the past three months:
BTC sharply slips downwards after a touch of the $50k price mark | Source: BTCUSD on TradingView
Given that Bitcoin’s price is now falling rapidly after breaking the $ 50,000 mark, a lack of network activity may actually point to a bearish market.
Related reading | When Bitcoin breaks $ 50,000, the indicators will look similar to the rally leading to ATH
However, it is not yet set in stone. Further price increases will be important here. If activity improves significantly, the signs could be bullish on BTC instead.