Bitcoin Faces Downward Pressure Amid Declining Activity and Market Shift

Bitcoin has been struggling to recover from this week’s losses, and although prices have stabilized slightly, the overall trend remains bearish.

A significant move upward would require Bitcoin to break through the resistance level around $66,000, which has so far remained intact.

Recent data shows a significant decline in Bitcoin’s on-chain activity as prices consolidate within a bearish pattern. An analyst on X pointed out that active Bitcoin addresses have been consistently dropping over the past few months. The only time this trend reversed was during a brief period from late 2023 to early 2024, when Bitcoin surged from under $30,000 to a peak of $73,800.

#Bitcoin active addresses: completely anemic. Are people using ETFs now, or is there something else? pic.twitter.com/3lx9xX5JYj

— Timothy Peterson (@nsquaredvalue) August 29, 2024

Now, with fewer active addresses, the network’s overall activity is slowing down. Historically, price increases have been accompanied by a rise in active addresses, so this decline is a concerning sign for the market’s health. The drop in transactions suggests that interest from both retail and institutional investors is waning.

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One possible factor behind the slowdown in Bitcoin’s network activity is the introduction of spot Bitcoin ETFs. Approved by the U.S. Securities and Exchange Commission (SEC), these ETFs have made it easier for institutions to invest in Bitcoin, changing the dynamics of the market.

In contrast to previous cycles driven by retail investors, large institutions now have a bigger influence on Bitcoin prices. This shift means that fewer, but larger, transactions can move the market, reducing the need for numerous smaller transactions that once kept network activity higher.

If this trend continues, Bitcoin could face even greater pressure, especially as both institutions and retail investors remain cautious. Recent data also shows that long-term holders have been moving their coins, which could signal further uncertainty ahead.

Alexander Stefanov