The recent price action of Bitcoin has left many investors concerned as the premier cryptocurrency continues to move within a consolidation range. Not only has the price cooled off since hitting a new all-time high in mid-March, but on-chain activity on the Bitcoin network has also slowed down over the past few months. Data analytics firm Santiment recently revealed that various metrics, such as transaction volume, daily active addresses, and whale transaction count, are showing a noticeable downtrend.
According to Santiment’s latest report, on-chain activity on the Bitcoin network is approaching historic lows. Transaction volume on the pioneer blockchain is declining to levels unseen in the past decade, while the number of daily active addresses has dropped to its lowest point since January 2019. Additionally, whale activity has slowed down, with the number of whale transactions (greater than $100,000) reaching the lowest point since the end of 2018.
At first glance, the decline in on-chain activity may seem like a worrying trend, indicating instability in market health. However, Santiment suggests that this dip might not necessarily be a precursor to imminent price drops for Bitcoin, as has been witnessed in recent weeks. The analytics company posits that the decrease in on-chain activity is more reflective of “crowd fear and indecision” among traders, rather than signaling a negative price movement.
The link between on-chain activity and market sentiment in the Bitcoin space is evident. Santiment’s data highlights how the reduction in transaction volume, daily active addresses, and whale transactions reflects the prevailing sentiment among traders. As Bitcoin’s on-chain activity dwindles, it underscores the impact of crowd psychology on the cryptocurrency market.
As per CoinGecko, the price of Bitcoin is currently hovering just above $60,770, with a marginal 0.2% price decrease in the past day. While on-chain activity on the Bitcoin network remains subdued, the price of the digital asset maintains stability amidst the ongoing consolidation phase. Moving forward, monitoring both on-chain metrics and market sentiment will be crucial in gauging the future price movements of Bitcoin.