Bitcoin (BTC) Network Activity Shows Signs of Weakening, Raising Concerns Among Analysts

Bitcoin has been facing some notable challenges recently, as its network activity shows signs of weakening. Despite a slight 1.68% gain in the past 24 hours

Bitcoin (BTC) has shown signs of weakening network activity, despite a slight gain in the past 24 hours. After reaching its peak of $107K a few weeks ago, BTC has been struggling to maintain an upward trend and is now trading below the $100K mark.

According to the latest data, the number of active addresses on the Bitcoin network has significantly dropped, with the figure now standing at 1.1 million. This decline in active addresses is a critical indicator of weakening network activity, as fewer investors appear to be actively participating in Bitcoin transactions.

This trend is concerning for analysts and traders, as active addresses often correlate with broader investor interest. When fewer people are engaging with the network, it typically signals lower demand, which can lead to price stagnation or even a downturn.

Axel Adler, a popular crypto analyst, recently pointed out that Bitcoin’s active addresses have been on a steady decline since hitting a new high a few weeks ago. The drop below the annual average number of active addresses is seen as a sign of reduced participation in the network. When this happens, it raises alarms for potential price volatility in the near future, especially if it’s paired with other warning signs.

One such sign is the spike in Bitcoin’s Network Value to Transactions (NVT) ratio, which has jumped from 89 to a historically high level of 978. The NVT ratio is an important metric used to assess the relationship between the network value and transaction volume. A high NVT ratio indicates that the network’s value is being driven more by speculation than by actual transactions. Historically, when the NVT ratio reaches extreme levels, Bitcoin tends to experience price corrections shortly after. The surge in the NVT ratio implies that Bitcoin’’s current price might be unsustainable and could face a decline.

Furthermore, there has been a noticeable drop in Bitcoin’s daily transaction volume, which has decreased from 402,000 to 350,000 over the past three weeks. This further confirms the observation that fewer users are actively interacting with the Bitcoin network. The decline in both active addresses and transaction volume points to lower demand among investors, which could lead to further price instability.

Historically, rising active addresses are often associated with bull markets, while a decrease in activity usually precedes market corrections. When combined with a high NVT ratio and declining transaction volume, this is seen as a red flag for Bitcoin’s short-term price movement. The reduction in network participation suggests that demand for Bitcoin might not be strong enough to support its current price levels.

The effects of this trend are already visible in Bitcoin’s price action, as the cryptocurrency has struggled to maintain an upward trend in recent days. Lower network activity means less demand, which in turn affects Bitcoin’s ability to continue rising. If demand remains weak for an extended period, institutions and larger investors might begin selling their positions to cover operational costs or take profits, putting more downward pressure on the market.

If this trend of low demand persists, Bitcoin could potentially dip further to levels around $94,992. On the other hand, if there’s a recovery in demand, Bitcoin could attempt to reclaim higher levels, with $98,830 being a potential target. Ultimately, traders and investors will need to keep an eye on the number of active addresses and the NVT ratio, as these factors are likely to play a significant role in determining Bitcoin’s price direction in the coming weeks.