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A detailed analysis of trading volume, NVT spread and variance, and daily active addresses showed a slowdown in Bitcoin network activity. The disconnect between rising prices and the slowdown in network activity it raises concerns about the sustainability of Bitcoin’s growth and the possibility of increased market volatility.
An analysis of some key Bitcoin network metrics
Trading volume represents the total number of BTC traded on various exchanges during a given 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 may mean that investors are skeptical about the future of Bitcoin. It can also mean that they are changing 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 a gain insight into the overall bitcoin network engagement, adoption and activity. 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 of rising Bitcoin prices.
Traffic refers to the number of individual tokens moved between addresses on the Bitcoin network per day. It shows the tendency of users to make Bitcoin transactions. Its decline means that users keep their coins in anticipation of future price increases or focus on other cryptos.
Is the bull market a miracle?
The Network Value to Transactions (NVT) ratio is a metric that compares Bitcoin’s market value to the number of transactions on its network. A low NVT ratio reflects that the network is undervalued and could lead to increased volatility. As Beincryto points out, the seemingly bullish Bitcoin market may be in for a correction soon. However, volatility should no longer scare 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 United States Congress recently announced a cryptocurrency regulation bill. This time, the upper house of the American parliament really means it establish a legal framework for crypto transactions. Could this be the reason for the disruption to the Bitcoin network?
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