Bitcoin’s Surge in Active Addresses Signals Crucial Turning Point

On-chain activity in Bitcoin is at its highest since December 2024, as measured by the number of active addresses.

And this is making many in the crypto community sit up and take notice, because when you get right down to it, active addresses are probably the best on-chain metric for trying to gauge what might happen next with the market.

“Historically, spikes in active addresses have preceded (and often accompanied) significant price movement in both directions,” Vetle Lunde, an analyst at Arcane Research, told Decrypt.

In a research note released earlier this week, Arcane said active addresses on the Bitcoin network hit 1.261 million on March 19, the highest level since December 2024.

Bitcoin’s price has been encountering pronounced fluxes, and short-term holders (STHs) are experiencing the full effect of this volatility. For the last four days, these same holders have been buying in quite a bit, adding over 35,000 BTC to their accounts—speculation has it this was more ’emotional’ buying in the wake of the price briefly dipping below $91K, which in turn left a good chunk of the supply ‘underwater.’ By data supplied through the unclouded eyes of Dune Analytics, two pretty notable things can be taken from this situation: 1) There’s a significant amount of fear in the market right now. 2) STHs are compounding their losses.

At its nadir, when Bitcoin was around $78K, the amount of losses reached a peak of around -15%. This kind of hurt is really hitting short-term holders of Bitcoin, especially those who bought near the top during last year’s bull run. As a whole, this group is definitely under water and feeling the pressure. The situation has, however, improved somewhat. As I write this, Bitcoin’s price has come back to around $84K-85K, which has effectively eased the amount of unrealized losses on a number of under water Bitcoin positions to around -8%. That number does still represent unrealized losses, however, for a significant portion of Bitcoin holders.

Losses are easing at the current price level, and this is giving a glimmer of hope to short-term holders. If Bitcoin can maintain or continue this climb, the short-term holders may soon become a selling group that is not exerting much selling pressure. In the past, the kinds of improvements we are seeing in loss mitigation have often coincided with the easing of broader market pressures and the generation of more sustained rallies or stabilizations in the price of Bitcoin.

Although the short-term holders’ losses and the sharp rise in active addresses strongly suggest a critical price turn is in the making, one must not forget that no single metric can ever guarantee a price reversal in either direction. The surge in on-chain activity, and the kinds of price moves they’re associated with, are cited so often by commentators that I sometimes wonder whether there’s actually a basis in reality for this well-known correlation.

In any case, the increase in on-chain activity we’ve seen of late is undeniably impressive, and I imagine this ramped-up level of participation must, if nothing else, feel pretty good for folks following the Bitcoin price from a day-to-day perspective.

Should Bitcoin’s price keep rising, the market might see a reduction in selling pressure applied by its short-term holders, which in turn could let the bulls seize control and signal a potential reversal of this downtrend we’ve been on.

This is frequently called a “capitulation” moment. That’s when the last wave of selling really runs out of steam, and the market gets ready to shift into whatever new trend it’s going to follow.

In this case, the uptick in active addresses makes it look like the sellers and buyers are definitely tussling over control in Bitcoin’s market. If the price keeps rising, it could put us in a situation where the tussle results in some new equilibrium.

The marketplace for Bitcoin is also witnessing encouraging signs from big-money investors, with inflows into the Bitcoin Spot ETF being a notable development. On February 28, the net inflow into the Bitcoin Spot ETF registered a healthy $94.3361 million, the first sign in nine days of renewed interest from large investors. Given the ETF’s relatively new status—November 2023 will mark just one year since the constellation of Bitcoin-based ETFs began trading—this is nonetheless an auspicious sign for the marketplace.

The Bitcoin Spot ETF could be seen as a sign of a return to a more confident crypto market, especially at a time when the pressure on short-term holder cryptocurrencies has been palpable. Institutional investors are often too far removed from their trading desks to be swayed by the kind of tight moving-average formations that trip traders in and out of positions. They have either a long horizon or thematic kind of playbook to work from.

Bitcoin’s latest increase in active addresses, together with the enhanced state of losses for short-term holders, indicates that the market could be approaching a critical turning point. No single indicator can guarantee a price reversal, but when you have on-chain activity that’s positively revised, short-term-holders loss states that are improved, and institutional players showing up in the pitch, that’s a pretty good spot for the market.

Nevertheless, as usual with cryptocurrency, volatility is anticipated, and investors should be wary as the market moves through these stormy waters. The next few days and weeks will be crucial in assessing whether Bitcoin can keep on its upward path and mark the initiation of a new bullish cycle, or if this surge is simply a short-term bounce before more price turbulence.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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