The two largest cryptocurrency assets, Bitcoin and Ethereum are witnessing a notable shift in investor behavior and confidence, as evidenced by a negative trend in their network activity, leading to sluggish performance in recent months.
Active addresses in Bitcoin and Ethereum will decline in 2024
Recently, Bitcoin and Ethereum activity has dropped dramatically due to a continued decline in the number of active addresses on both networks. Kyle Doops, the host of the Crypto Banter show and market expert, shared the worrying development on the X platform (formerly Twitter), sparking speculation about its impact on the two most important digital assets.
This pessimistic turn of events signals a potential slowdown in user adoption and a broader reduction in transaction volume, reflecting that Bitcoin’s market momentum and Ethereum could decrease. It is believed that several factors, such as market uncertainty and profit-taking due to current price fluctuations, led to the decline, which could cause users to temporarily abandon the network.
The market expert emphasized that the number of active addresses has been continuously decreasing since the beginning of this year, despite the general expectation of a bull market. In concrete terms, this means that fewer wallets deal with the two blockchains.
Kyle Doops has underlined the need for patience in a shift to quantitative easing to reignite market excitement as the sector waits for new investors as liquidity is sucked away by Federal Reserve (Fed) tightening.
Leading on-chain data and analytics company CryptoQuant has done just that shed light on the development, noting that new investors are not entering the crypto landscape as investors and liquidity have already entered the market in anticipation of the Explore Bitcoin and Ethereum Exchange-Traded Funds (ETFs).
Despite this, CryptoQuant noted that the decline in active addresses means that the hype has not yet taken place and that there has been no rally following the First interest rate cut by the Fedas expected. This is due to the Fed continuing with quantitative tightening (QT), a process of removing liquidity from the market.
Moreover, CryptoQuant claims that there was also a notable increase in the M2 money supply during the same period. Ultimately, the platform expects an increase in the number of active addresses and a return of market hype once the Fed resumes quantitative easing, a method of adding liquidity to the market.
Negative price sentiments are growing
Bitcoin and Ethereum continue to struggle to initiate a rally due to the crisis general market turbulence, raising concerns about the trajectory of key digital assets.
Currently the price is BTC is down almost 2% over the past day, trading at $60,945 ETH sees a bigger price drop of almost 5% in the same time frame, trading at $2,360. Both assets are currently experiencing declining investor sentiment as their trading volume shows a similar decline of over 19%.
Featured image from Unsplash, chart from Tradingview.com