A detailed analysis of trading volume, NVT circulation and divergence, and daily active addresses revealed a slowdown in Bitcoin network activity. The disconnect between rising prices and the slowdown in network activity raises concerns about the sustainability of Bitcoin’s growth and the possibility of increased market volatility.
Analysis of some key Bitcoin network metrics
Trading volume represents the total number of BTC traded on various exchanges during a certain period. The data shows that it has fallen sharply. This figure is one of the most important for measure market liquidity and investor interest. Therefore, this drop could mean that investors are skeptical about the future of Bitcoin. It can also mean that they are converting their bitcoins to other cryptocurrencies.
The number of daily active addresses represents the number of unique addresses that participate in transactions on the Bitcoin network each day. It allows to gain insight into the engagement, adoption and overall activity of the bitcoin network. Its decline may mean that there is a discrepancy between the market value and the actual use of Bitcoin. This is a long-term risk for rising Bitcoin prices.
Traffic refers to the number of individual tokens moved between addresses on the Bitcoin network per day. It represents the propensity of users to carry out Bitcoin transactions. Its decline means that users hold their coins in anticipation of future price increases or focus on other cryptos.
Is the bull market a mirage?
The Network Value to Transactions (NVT) ratio is a metric that compares the market value of Bitcoin to the volume of transactions on its network. A low NVT ratio indicates that the network is undervalued and could lead to increased volatility. As indicated Beincryto, the Bitcoin market which seemed to be on the rise may see a correction soon. However, volatility should no longer scare off investors since it is part of the nature of cryptocurrencies. The numbers seen on the Bitcoin network may be due to external factors and not Bitcoin itself.
The US Congress recently announced a cryptocurrency regulation bill. This time, the upper house of the American parliament really intends to establish a legal framework for crypto transactions. Could this be the cause of the disruption on the Bitcoin network?
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