Analyzing the momentum of new and active addresses is crucial for gauging market health and investor sentiment.
Active address momentum, a measure of the number of unique Bitcoin addresses actively transacting on the network, indicates user engagement and network utilization. On Nov. 2, 2023, the monthly average of active addresses crossed above the yearly average, maintaining this trend until Dec. 14.
After this period, a rapid decline ensued, falling to levels seen in June 2023. This decline, particularly after a sustained period above the yearly average, suggests a contraction in market participation and could signal a brewing change.
New address momentum, indicative of new market participants, followed a similar pattern. After surpassing the yearly average on Nov. 5, it remained above it until Dec. 25 before experiencing a slight decline to October 2023 levels. This pattern often reflects investor confidence and market expansion, but its recent decline could imply a waning interest or a wait-and-see approach among potential new market entrants.
Transaction momentum represents the so-called vibrancy of the network. It refers to the rate of transactions occurring on the network. It serves as the key indicator of Bitcoin’s activity level, with higher momentum suggesting increased transfer and trading activities among users.
he average monthly number of transactions stayed above the yearly average for most of 2023. It dipped below the yearly average on Oct. 15, only to rise again on Nov.6, peaking at an all-time high of 575,575 transactions on Jan. 1, 2024. This resilience in transaction momentum, even amidst fluctuating active and new addresses, is noteworthy.
The decline in new and active addresses’ momentum can be interpreted as the calm before the storm. These reductions could be attributed to the anticipated approval of a spot Bitcoin ETF in the U.S. The initial excitement surrounding the ETF’s potential approval appears to have diminished by November, as evidenced by the decline in analyzed momentum.
Since then, the subdued activity in the addresses domain likely indicates a market in wait for significant movements triggered by the ETF approval. In theory, a rising Bitcoin price would correlate with increased address momentum; however, Bitcoin’s surge past $40,000 did not catalyze changes in address momentum.
The sustained high transaction momentum, driven partly by the growing popularity of inscriptions, underscores the network’s robustness and continued use despite variations in address activity. Against declining address momentums, this sustained transaction activity paints a complex picture of the current Bitcoin market.
While address momentum suggests a market in anticipation or holding pattern, the high transaction volume reflects ongoing network engagement. These contrasting signals highlight the market’s complexity and the need for investors to remain vigilant, as the current calm could be a precursor to significant market movements.
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