The two predominant cryptocurrency assets, Bitcoin and Ethereum, are experiencing a significant change in investor behavior and confidence, as evidenced by a downward trend in their network activity, resulting in lackluster performances over the past few months.
Active Addresses in Bitcoin and Ethereum Decline in 2024
Recently, both Bitcoin and Ethereum have seen a sharp decline in activity due to a sustained decrease in the number of active addresses on their networks. Kyle Doops, host of the Crypto Banter show and market analyst, reported this concerning trend on the X (formerly Twitter) platform, raising speculation about its implications for these leading digital assets.
This adverse situation suggests a potential halt in user adoption and a broader decline in transaction volume, indicating a possible decrease in Bitcoin’s and Ethereum‘s market momentum. Various factors, including market volatility and profit-taking due to recent price fluctuations, are believed to have contributed to this decline, prompting users to temporarily exit the network.
The market analyst emphasized that the number of active addresses has been steadily declining since the start of this year, despite a general expectation for a bull market. This specifically suggests a reduction in the number of wallets interacting with the two blockchains.
Kyle Doops has highlighted the necessity for patience regarding a transition to quantitative easing to revive market enthusiasm as the sector awaits new investors, with liquidity being squeezed by the Federal Reserve’s (Fed) tightening measures.
Prominent on-chain data and analytics firm, CryptoQuant, has also elucidated this trend, indicating that new investors are hesitating to enter the crypto landscape as liquidity has already filled the market in anticipation of the Spot Bitcoin and Ethereum Exchange-Traded Funds (ETFs).
Nevertheless, CryptoQuant noted that the reduction in active addresses signifies that the anticipated hype has yet to materialize, and there has been no rally following the Fed’s initial rate cut as expected. This is largely because the Fed continues its quantitative tightening (QT) process, which involves withdrawing liquidity from the market.
Additionally, CryptoQuant observes that during this period, there have also been noticeable increases in the M2 money supply. Ultimately, the platform anticipates an increase in active addresses and a resurgence of market excitement once the Fed resumes quantitative easing, a strategy for adding liquidity back into the market.
Growing Negative Price Sentiments
Bitcoin and Ethereum struggle to generate a rally due to the overall market turmoil, raising concerns about the future trajectory of these leading digital assets.
Currently, the price of BTC has decreased by nearly 2% over the past day, trading at $60,945, while ETH is experiencing a more significant decline of nearly 5% in the same period, trading at $2,360. Both assets currently face diminishing investor sentiment as their trading volume reflects a similar decrease of over 19%.
Featured image from Unsplash, chart from Tradingview.com
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