The two largest cryptocurrency assets, bitcoin and Ethereum are witnessing a notable shift in investor behavior and confidence, as indicated by a negative trend in their network activity, which has led to sluggish performance in recent months.
Active addresses in Bitcoin and Ethereum plummet in 2024
Lately, Bitcoin and Ethereum activity has plummeted dramatically due to a persistent drop in the number of active addresses on both networks. Kyle Doops, host of the Crypto Banter show and market expert, shared the worrying evolution of platform X (formerly Twitter), which generated speculation about its impact on the two main digital assets.
This pessimistic turn of events indicates a possible slowdown in user adoption and a broader reduction in transaction volume, reflecting that Bitcoin market momentum and Ethereum could be decreasing. Several factors, such as market uncertainty and profit-taking due to current price swings, are believed to have caused the drop, which would cause users to leave the network momentarily.
The market expert highlighted that the number of active addresses has been steadily declining since the beginning of this year despite the general expectation of a bull market. Specifically, this implies that fewer wallets interact with the two blockchains.
Kyle Doops has stressed the need for patience towards a shift towards quantitative easing to reignite market enthusiasm as the sector waits for new investors because liquidity is being depleted by the Federal Reserve (Fed) tightening.
Leading on-chain data and analytics company CryptoQuant has also 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 Bitcoin and Ethereum Spot Exchange Traded Funds (ETFs).
Despite this, CryptoQuant noted that the drop in active addresses means that the hype has yet to materialize and there was no rebound after the The Fed's first rate cutas expected. This is due to the fact that the Federal Reserve continues quantitative tightening (QT), a process of withdrawing liquidity from the market.
Furthermore, CryptoQuant claims that during the same period, there were also notable increases in the M2 money supply. Ultimately, the platform expects an increase in active addresses and a return to market buzz once the Federal Reserve resumes quantitative easing once again, a method of adding liquidity to the market.
Negative price sentiments grow
Bitcoin and Ethereum continue to struggle to start a rally as a result of the general market turbulence, raising concerns about the trajectory of major digital assets.
Currently, the price of btc has fallen almost 2% in the last day, trading at $60,945, while ETH is experiencing a further price drop of almost 5% in the same time period, 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
