Since early 2024, Bitcoin and Ethereum have consistently rejected active addresses. CryptoQuant data highlights that the number of active Bitcoin addresses decreased from 1.17 million to 855,000, and Ethereum active addresses decreased from 382,000 to 312,000. This decline indicates a lack of new investors entering the space, which is a key factor for market growth, especially bullish momentum.
The absence of new participants means that current market participants are dominant. Investors who were waiting for spot ETF approval are already being counted. Despite this expectation, the expected widespread campaign hype did not occur.
The first important factor was the Federal Reserve's continued quantitative tightening, which sucked liquidity from the market. This policy change offset the expected impact of a small increase in the M2 money supply.
However, there is also hope that the Fed will eventually return to quantitative easing, meaning an injection of new liquidity. When that happens, the flow of money will likely create the long-expected hype and increase the number of active addresses. Until then, it's all about patience.
Short-term Bitcoin flow decline
CryptoQuant also reported that the market may be preparing for the next uptrend. The most important metric, Exchange Flow Multiple, has declined. This indicator shows the relationship between Bitcoin inflows and outflows on an exchange in the short term considering a period of 30 days compared to 365 days or more.
Low exchange flow multiples suggest that short-term inflows and outflows are far below long-term inflows, which speaks to investor accumulation. When the currency flow multiple was at its lowest this year, it signaled lower currency activity, which could mean investors are becoming more patient.
Investor patience usually shows itself in the early stages of a bull market. Smart money doesn't want to part with assets in anticipation of price increases in the near future. Furthermore, corrections after price declines usually lead to lower exchange activity as traders wait for stabilization before making further trades.
A similar pattern of low exchange flow multiples could be spotted in advance ahead of a rally in 2023. Given that current levels are approaching lows again, this could signal a new uptrend in the market, with long-term holders hoping for further upside in the future. I am refraining from suddenly relinquishing my position.
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