Since early 2024, the trend of declining Bitcoin and Ethereum addresses continues to worry investors. According to recent data from CryptoQuant highlights, the number of active Bitcoin addresses has seen a drop from 1.17 million to 855,000, while Ethereum’s active addresses decreased from 382,000 to 312,000. This decline suggests a waning interest among new investors entering the market, a crucial factor for driving market growth and maintaining bullish momentum.
The decreasing number of new participants implies that the market is largely controlled by existing investors. Those awaiting the approval of spot ETFs are already accounted for. Despite expectations, the broader market hype anticipated from these events has yet to materialize.
One significant factor contributing to this decline is the Federal Reserve’s ongoing quantitative tightening, which has siphoned liquidity from the market. This policy has counteracted the potential impact of minor increases in the M2 money supply.
Interestingly, there is hope that the Federal Reserve may eventually switch back to quantitative easing, injecting fresh liquidity into the market. When this occurs, it might reinvigorate hype and boost the number of active addresses. Until then, patience is key for market participants.
Bitcoin Address Activity: A Short-Term View
CryptoQuant also reported that the market could be on the cusp of a new upward trend. The Exchange Flow Multiple, a crucial metric showing the relationship between short-term and long-term Bitcoin exchange activity, has declined.
This low Exchange Flow Multiple suggests that short-term inflows and outflows are significantly lower compared to long-term activity, indicating that investors are in accumulation mode. Historically, periods when this metric is at its lowest signal reduced exchange activity, reflecting investor anticipation for future price increases.
Investor patience often marks the early stages of a bull market, where smart money holders refrain from liquidating their assets in anticipation of higher future prices. A similar pattern was observed before the 2023 rally. Given that the Exchange Flow Multiple has approached these low levels again, it may signal an imminent upward movement in the market. Long-term holders appear to be waiting for further gains before deciding to sell.
Related Reading | Bitcoin’s 10% September Surge Signals Bullish Momentum Ahead
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