Data reveals that while Bitcoin’s price is shooting up, the on-chain activity hasn’t improved much in the past week. What could be the reason behind this behavior?
Bitcoin Breaks $50k, But Activity Lags Behind
As per this week’s edition of the Arcane Research report, on-chain activity seems to be slow to recover despite the price of the cryptocurrency jumping high.
The metric used for measuring the activity here is the Bitcoin 7-day average number of active addresses indicator, which as its name suggests gives the number of address on the network that saw transactions within a specific period of time.
Now, here is the chart for the BTC number of active addresses (7-day average) vs the price:
Bitcoin's activity seems to be lagging behind the price | Source: Arcane Research
On examining the above graph, two things become apparent. First, the number of active addresses right now is just under 900k. This shows that the indicator has certainly recovered since the lows of around 750k after the price crash.
Second, while the Bitcoin price has now risen to about $50k, the activity hasn’t shown as big a spike yet. The active addresses are still at the same levels as they were during the summer of 2020, when the price was around $10k. During the bull rally earlier in 2021, the same metric’s value crossed 1.2 million.
Now, the question 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 might not be very interested in Bitcoin at the moment so they haven’t moved their investments into it.
The other reason is that more investors are now viewing BTC as a store of value so they have no reason to move their coins around. This would imply a bullish signal for the market as there are more long-term holders in the network now.
What’s Next For BTC’s Price?
At the time of writing, Bitcoin’s price trades around $48k, up 5% in the last 7 days. Over the past month, the cryptocurrency has accumulated 40% in gains.
Below is a chart highlighting the trends in the price of BTC over the last three months:
BTC sharply slips downwards after a touch of the $50k price mark | Source: BTCUSD on TradingView
Considering that Bitcoin’s price is now quickly falling down after a break of the $50k level, a lack of network activity may indeed suggest a bearish market.
However, it’s not yet set in stone. Further increases in the price will be of importance here. If activity improves considerably, signs could be bullish for BTC instead.