Key facts:
In May of this year, 430,000 wallets with a balance in BTC became inactive.
Transactions involving exchanges have decreased to 50%, from 80% in May 2021.
The sharp bearish season of bitcoin last June contributed to the almost complete expulsion of “tourists from that market”, says the analysis firm Glassnode. In this sense, the so-called HODLers, who are nothing more than users who accumulate satoshis and bitcoins, remain the last line of defense for the price.
Both the closing of last June and that of the first half of 2022 constituted notorious negative records in the evolution of the price of bitcoin (BTC). In agreement to the report by Glassnode, bitcoin price in june closed with a return of -37.9%, while the return in the first half is -59%. In the context of the current correction, the price of bitcoin has fallen a total of 70.72% since last November 10, when it reached its historical maximum close to USD 69,000.
As seen in the graph below of bitcoin’s monthly gains (green) and losses (red), the June losses are very close to the 38.58% retracement recorded in August 2011.
“Bitcoin tourism” at its lowest level
Tracking active Bitcoin addresses provides an important indicator of on-chain activity. Although the number of active addresses does not correspond 1 to 1 with the number of users, the growth of these does reflect greater activity in the blockchain.
As an example of this correspondence between the activity in the network and the evolution of the addresses, the following graph shows how the maximums that occur in the addresses correspond to historical maximums of the price and other local maximums. For example, the biggest spikes in active addresses are seen in December 2017, January 2018, January 2021, and April 2021.
Those maximum values in active Bitcoin addresses they are 1.19 million in December 2017 and 1.24 million in January 2021. On the other hand, a band of low activity is defined, delimited in the lower part by the successive minimums of the curve of active directions, which follow an increasing trend.
According to the most recent data, at the end of last week, active addresses reached 870,000. The number of users is much lower than that figure because there are users who have more than one bitcoin walletand there are also entities such as exchanges that reserve a large number of addresses to maintain their operations.
To mitigate this disparity between active addresses and network users, Glassnode handles the concept of entities. Through various algorithms, Glassnode determines the active addresses that are controlled by a single entity, and then totals the number of entities.
As seen in the graph of active entities, which Glassnode associates with a more likely user base. As seen, during the peaks of activity in December 2017 and in January 2021, the maximums are 376,000 and 432,000 entities, respectivelyapproximately one third of the active addresses.
Glassnode calculated the net growth of entities and notes that, in the phases prior to capitulations, growth rates decline, as occurred between January and April 2021 before the capitulation in May. More recently, the collapse of Terra also ended a phase of growth that had already been attenuatedsays the report.
Active entities saw a notable increase after the all-time high to November 2021, as participants speculated on a further price rise. However, this expectation has since dissipated and a prevailing downtrend has now been established. There are about 244,000 active entities per day, languishing at the lower end of the low-activity channel typical of bear markets (shaded red).
Glassnode. Week-Onchain.
Base of bitcoin HODLers remains
To reinforce the thesis that the activity of the Bitcoin blockchain has decreased, the Glassnode report examines the evolution of the number of transactions in the chain. In previous bear markets, there have been clear declines in transactions as the price declines, as seen in the chart below. Their decline is noted both in 2018 and in May 2021.
However, since July 2021, the number of transactions has been lateralizing and stuck in a narrow band, within what Glassnode typifies as a channel of low activity.
To reinforce this point, the reductions of bitcoin addresses with balances greater than zero, although it is an increasing curve over time, shows reductions at times when intensive bitcoin sales occur. These sales, which can be classified as capitulations, Although they are decreasing percentage-wise, they usually mark the beginning of a bearish season. They also mean that short-term investors leave the market when the first signs of falling prices appear.
The following graph shows a notable decrease, from January to March 2018, of a quarter of the addresses with a BTC balance greater than zero. Some 7 million addresses were emptied in this period.
Also from April to May 2021, in the midst of the great migration of miners out of China, another decrease was detected, albeit 2.4%, with a total of 1 million addresses whose balance was zero. The last decrease was in May of this year, which although it was 1% of the addresses with a positive balance of BTC, represented the activity output of 430,000 addressesamid a sudden drop in price.
Almost all of the fringe buyers and sellers appear to have finally capitulated and have been purged from the network over the last 12 months. This leaves only a base of convinced, highest resolution HODLers. There are few reinforcements on the demand side of bitcoin and therefore prices have been correcting until these HODLers can set the floor.
glass node.
Another fact that shows that HODLers are in the last line of resistance is the percentage of transactions in which an exchange is involved. As of February 2018, 94% of transactions involved an exchange. In May 2021, that percentage reached 80% and continues to drop. Transactions involving at least one exchange, is currently slightly below 50%according to the report.
“Exchange dominance has gone through a major detox since the May 2021 high and has seemingly stabilized at 50%. This supports our previous assertions that the market is moving towards a HODLERS regime,” the report says.
It also tracks the outflow of BTC from exchanges. Of the 750,000 BTC that have left the exchanges since March 2020, 18%, which could translate to 142,500 BTC that have left in the last three months.
After several weeks in decline, the price of bitcoin recovered this Sunday and is, at the time of writing this article, at USD 20,347, according to the CriptoNoticias price index.