The number of new Bitcoin addresses registers a correction: on-chain analysis – BeInCrypto

The analysis on-chain Introduced today by BeInCrypto attempts to estimate the stage of the market based on an analysis of the number of new Bitcoin addresses and the percentage of entities with profits. The data on-chain indicate that individual “retail” investors are not yet the dominant force in the market.

The decrease in the number of new addresses and the decrease in the number of profitable entities are strong signs that the market is far from the FOMO that is typically seen at the end of a bull market. At the same time, both indicators are providing bullish divergences suggesting that the uptrend in the crypto market could continue soon.

Bitcoin searches on Google drop

One of the easiest ways to measure enthusiasm around the cryptocurrency market, and Bitcoin in particular, is the Google Trends tool. You can measure the search rate for the phrase “Bitcoin” in a given region and time period. The end of the bull market of the previous cycle coincided with a record level of searches for the phrase “Bitcoin” around the world., which peaked at 100 (yellow circle) in December 2017.

During the current bull market, the Google Trends graph peaked in May 2021 with a value of 79 (green circle). Since the beginning of July, The indicator has returned to the 24-36 range, and this week it is targeting a value of 26.

Source: Google Trends

Retail traders are waiting for their turn: new BTC addresses

Google Trends is not a data indicator on-chain, but it remains constant. In early 2016, the graph of the number of new BTC addresses shows a picture that matches the aforementioned data. The new BTC addresses is the number of unique addresses that first appeared in a Bitcoin network transaction. The indicator is a good approximation of the growth dynamics of the network and the influx of new users.

In the five-year graph, we can see that the spike in new directions occurred at the end of the bull market in December 2017 (green Arrow). A strong correction was followed by a long and slow consolidation, which also had local lows and highs.

The latest peak was reached in early January 2021 (blue arrow) after Bitcoin completed a rally from around $ 10,000 to the all-time high of $ 42,000. Since then, A correction has been made on the new direction chart (red arrow), despite the BTC price reaching higher levels.

New Bitcoin Addresses Chart by Glassnode

The cryptocurrency market analyst @OnChainCollege found an interesting pattern on this chart. In a tweet recent, compared the fractals of new directions of 2017 and 2021. The graph shows that the number of new addresses is less than when the cycle peak was reached.

Then he divided the two charts into ascending and descending sequences. Their similarity suggests that the large influx of new users in this cycle is yet to come. Here’s how he commented on his performance:

“We know this. Retail trading is not here. Nothing new.”

Source: Twitter

However, in opposition to this claim, the well-known analyst on-chain @woonomic tweeted a different graphic. It seems to contradict previous ideas about the passive role of individual investors.

In your opinion:

“The last time retail trading bought the drop this hard was at the bottom of the crash. [ocasionado por el] COVID”.

Source: Twitter

Decrease in the number of entities with profits

Other indicator on-chain, which suggests that the trading retail is far from the FOMO stages, it is the percentage of entities in profit. The indicator takes into account all entities whose funds were purchased on average at prices lower than the current price.

Counting from the all-time high of $ 69,000 to the current price of Bitcoin, the indicator has experienced a drop of around 25%. The intensity of this decline can be compared with the crisis that occurred in May.

The percentage of entities with profits almost reached a low at the end of the summer BTC correction (dashed line).

Source: Twitter

The significant difference is the price of Bitcoin, which fell to $ 29,000 from its July low. Today, trading in the range of $ 46,000 – $ 49,000, It seems that the same percentage of traders are reporting losses.

This divergence was highlighted by the analyst @Parabolic_Matt, who compared it to a similar situation in 2020-2021. The price of Bitcoin is increasing while the number of entities with profits decreases (yellow lines). When this type of bullish divergence has occurred in the past, BTC has seen a dynamic rise.

Source: Twitter

Another way of interpreting this divergence is that the trading retailer is entering the market. New entities buy the top hopefully, then capitulate to the bottom and sell at a loss.

This leads to another accumulation opportunity for so-called “smart money” and the start of another wave of bullishness, where cheap BTC sells more expensive to the next wave of new market participants.

The time when growth in new directions turns parabolic and the vast majority of entities turn a profit will likely be a strong signal for the peak of this bull market. The data on-chain indicate that the time is not yet.

For the latest Bitcoin (BTC) analysis from BeInCrypto, click here.

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The number of new Bitcoin addresses registers a correction: on-chain analysis – BeInCrypto

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