Bitcoin [BTC] Transaction Volume Drops to 2023 Lows, Raising Concerns About Market Strength

Bitcoin's [BTC] transaction volume has dropped to levels not seen since early 2023, raising concerns about the market's strength.

Bitcoin's [BTC] transaction volume has dropped to levels last seen in early 2023, sparking concerns about the market's strength.

At its peak in mid-2024, Bitcoin saw over 700K daily transactions, a stark contrast to the current levels, which have fallen below 400K.

This reduction in transaction activity could be crucial, as BTC faces strong resistance near the $86,000 mark.

Could this spell the beginning of a bearish trend, or is the market simply preparing for another move with a period of consolidation?

Transaction activity drops sharply

Recent data from Glassnode reveals a significant decline in BTC's transaction volume.

At its peak, during the second quarter of 2024, Bitcoin saw over 700K daily transactions. However, in recent times, the transaction volume has fallen below 400K.

For perspective, a drop in transaction volume is often observed during periods of price stagnation or corrections.

This reduction in transactions suggests that there is less activity on the network, which could indicate reduced market participation.

If this trend continues, Bitcoin may face difficulties in maintaining its current price levels, as a lack of demand could weaken support zones.

Open Interest and volume confirm traders pulling back

A broader analysis of market indicators reveals further bearish signals.

According to CryptoQuant, Bitcoin's Open Interest (OI) has also declined notably, indicating that traders are pulling back from their leveraged positions.

Across exchanges, the total OI stands at $86.2 billion, down from highs above $100 billion earlier this year.

Although the OI has increased notably in the last few days, the comparison suggests that traders are becoming less engaged with leveraged trades at present.

This trend could lead to lower volatility and a diminished speculative buying appetite.

Meanwhile, as tracked by Santiment, Bitcoin's trading volume has also seen a notable drop. BTC volume recently touched 36.31 billion, a sharp decline from its February highs.

The lower volume confirms that fewer traders are actively engaging with BTC at its current price, making it more likely that a downside move will occur if buyers fail to step in.

Key levels to watch

At the time of writing, Bitcoin was trading at around $85,856, having encountered resistance at $86,877. The 50-day Moving Average was at $85,873, acting as a crucial pivot point. Failure to stay above this level could send BTC back toward support at $80,000.

Conversely, if BTC manages to break past $87,500, it could challenge the $90,000 level, which remains a psychological barrier.

While a price breakdown is not yet confirmed, traders should closely monitor transaction volume and OI for signs of further deterioration.

Bitcoin could enter a prolonged consolidation phase or even a bearish correction in the coming weeks if network activity fails to recover.