With several indicators on the Bitcoin (BTC) chain still in bearish range, increased demand and fees spent on the network will be needed to continue the recent price rally, according to Glassnode.
Blockchain analysis firm Glassnode made the assessment of the growth of the scarce market over the past week in its latest report “The Week On Chain” on Monday.
In the report, analysts pointed to sideways growth in transactional demand, active bitcoin addresses left in a “well-defined descending channel,” and falling network fees as all the reasons that dampened investor enthusiasm for the 15% rise in BTC price over the. last week However, BTC is currently down 2% in the past 24 hours, trading below $23,000 to $22,899 according to CoinGecko.
The focus now is on whether this is a bear market rally, or whether the fundamentals continue as support.
Read more in The Week On-chain https://t.co/taOkbeVlyv
— glassnode (@glassnode) August 1, 2022
#Bitcoin and #Ether came strongly from the bottom, coming above the realized price. The focus now is on whether this is a bear market rally, or whether the fundamentals continue as support. More information in The Week On-chain https://t.co/taOkbeVlyv — glassnode (@glassnode) August 1, 2022
The report begins by describing the characteristics of the shaving market, including a decline in chain activity and rotation from speculative investors to long-term holders. He suggests that the Bitcoin network still exhibits all of these characteristics.
Glassnode writes that a decrease in activity on the network can be interpreted as a lack of new demand on the network from speculative traders compared to long-term holders (LTH) and investors with a high level of faith in the network’s technology. The report says:
“With the exception of some high activity spikes during major surrender events, current network activity suggests that there is little inflow of new demand left at this time.”
Unlike last week, when a significant level of demand seemed to be settling at the $20,000 level for BTC and creating a floor, the additional demand needed to support any further price increases is not discernible. Glassnode refers to the steady decline in active addresses as a “weak market demand profile,” which has essentially been in place since last December.
The analysis noted similarities between the current network demand profile and the profile established in the 2018-2019 period. Similar to the previous cycle, network demand declined after the all-time high in BTC price in April 2021. Demand recovered significantly during the following November as prices recovered to an all-time high.
However, since last November, demand has been on the wane, with a major spike during the huge sales in May:
“The Bitcoin network is still dominated by HODLers, and so far no significant new demand has resulted.”
Glassnode added that weak demand from anyone other than bitcoin enthusiasts is pushing network fees into markup territory. For the past week, the daily fee was 13.4 BTC. In contrast, when prices broke even last April, daily network fees were over 200 BTC.
Also Read: Bitcoin Bulls Cost $23,000, Warn Bear Market Is In Good Shape
Assuming prices rise significantly, Glassnode suggests this could mean demand is on the rise, helping to support further “constructive structural change” in Bitcoin network activity:
“Although we still see a significant increase in fees, keeping an eye on this indicator is likely to be a sign of recovery.”