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Bitcoin On-Chain Activity Nearing Historic Lows – What This Means For BTC Price

The price of Bitcoin has continued to move within a consolidation range since hitting a new all-time high in mid-March. This sluggish price action has been a source of worry to most investors, especially when the premier cryptocurrency recently lost its support at the $60,000 level.

Interestingly, price is not the only Bitcoin metric that has cooled off since the first quarter of the year. Data analytics firm Santiment has revealed that on-chain activity on the Bitcoin network has also slowed down over the past few months.

How Historically Low On-Chain Activity Affects BTC Price

In a new post on the X platform, Santiment revealed that on-chain activity on the Bitcoin network is approaching historic lows. This revelation is based on the noticeable downtrend in various metrics, notably transaction volume, daily active addresses, and whale transaction count.

According to the blockchain intelligence platform, investors have been transacting less with BTC since the premier cryptocurrency hit a new all-time high price. As a result, Bitcoin’s on-chain activity has dropped to its lowest level since 2019.

Breaking down the metrics, Santiment found that transaction volume on the pioneer blockchain is falling to its lowest in the past decade. The data analytics firm defines transaction volume as a metric that tracks the total amount of coins transacted for a given asset within a timeframe.

What’s more, Santiment mentioned in its report that the number of daily active addresses, which measures the number of distinct addresses that participated in a BTC transaction on any given day, has reached its lowest point since January 2019.

Bitcoin

The blockchain intelligence platform also revealed that whale activity has slowed down on the Bitcoin network. The number of whale transactions (greater than $100,000) has fallen to the lowest point since the end of 2018, according to Santiment’s data.

On the surface, the decline in on-chain activity seems like a worrying trend and a symptom of an unstable market health. Santiment, however, noted that this dip might not necessarily be associated with imminent BTC price dips – as seen in the past weeks.

The analytics company said that the decline in on-chain activity is more indicative of “crowd fear and indecision” amongst traders. Ultimately, this underscores the connection between the on-chain activity and sentiment in the Bitcoin market.

Bitcoin Price At A Glance

According to data from CoinGecko, the price of Bitcoin sits just above $60,770, with a mere 0.2% price dip in the past day.

Bitcoin

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Bitcoin Monthly Stats: Cost Basis, Long-Term Holders, And The Cyclical Bottom

In this month’s The Bitcoin Monthly, ARK Invest focused on Ethereum and the Merge. As a side dish, they did publish some premium and review-worthy stats that we’re about to cover. Never mind the market, the Bitcoin network keeps producing block after block regardless. The stats that this whole activity produces can be critical in understanding the market, though.

That’s where ARK Invest’s The Bitcoin Monthly comes in. The publication defines itself as “an “earnings report” that details on-chain activity and showcases the openness, transparency, and accessibility of blockchain data.” So, the data we’re about to cover is The Bitcoin Monthly’s reason to be. 

The Bitcoin Monthly: 200-Week Moving Average And Investor Cost Basis

  • “After closing above its 200-week moving average in July,1 bitcoin’s price reversed and slipped below it in August. Currently at $22,680, the 200-week moving average now seems to be resistance.”

The center couldn’t hold. The price’s recovery was short-lived. Markets are red across the board and bitcoin is no exception. At the time of writing, bitcoin trades at $19,874. For those keeping score, that’s just below last cycle’s all-time high of $20K. Something that shouldn’t happen, but a few degrees of error are always understandable. 

  • “Bitcoin currently trades above investor cost basis at $19,360, its strongest on-chain support level (…) Importantly, throughout bitcoin’s history, trading at investor price usually marks a bottoming process.”

Times are tough, but bitcoin still trades above investor cost basis. The Bitcoin Monthly clarifies, “Investor price is calculated by subtracting the cost basis of miners from the general cost basis of the market.” As we see it, The Bitcoin Monthly is calling the bottom. They didn’t say it in those exact words, but they certainly insinuated it. 

Is the bottom really in, though?

BTC price chart for 09/17/2022 on Gemini | Source: BTC/USD on TradingView.com
The Bitcoin Monthly: Short-Term Holder Vs. Long-Term Holder

  • “The short-term-holder (STH) cost basis is approaching its longterm-holder (LTH) cost basis ––an event that has marked cyclical bottoms in the past. (…) Since the end of July, the difference between short- and long-term holders’ cost basis has shrunk from $5,840 to $2,500”

The Bitcoin Monthly sees it as a sign that “the market typically is capitulating and shifting back to long-term participation.” Bitcoin’s consolidation process might be ending soon. We could stay for a while in the bottom area, though. That has happened before. The point is, all of the indicators The Bitcoin Monthly highlighted this month point in the same direction. To the bottom.

  • “The supply held by long-term bitcoin holders is 34,500 coins away from reaching 13.55 million– its all-time high. Long-term-holder supply constitutes 70.6% of total outstanding supply.

This one is the most bullish of all the featured stats. To clarify, coins that haven’t moved in 155 days or more qualify as “long-term holder supply.” The tourists and the people with high hopes left a long time ago. And the lion’s share of the bitcoin supply is now in the true believers’ possession. A remarkable situation that doesn’t get mentioned enough.

About The Ethereum Merge

  • “In August, ether outperformed bitcoin by 7.6% (…) Historically, ether has outperformed bitcoin during “riskon” bull markets and underperformed during “risk-off” bear markets.”

The merge’s effects affected the market throughout the whole narrative. Even though we’re in a “risk-off bear market,” ETH took over and lead the market for a while there. They accomplished the mythical feat and… the market turned on them. After what seemed like mission accomplished, ETH’s price started to bleed.

Hidden behind a secret door, that’s what The Bitcoin Monthly contained.

Featured Image by Maxim Hopman on Unsplash | Charts by TradingView

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Bitcoin Selloff Provides Boost To Miner Fee Revenues

Bitcoin sell-offs have been the order of the day since the weekend. This has translated to ever-decreasing prices for the digital asset. Another avenue where this has had an effect has been the miner fee revenues. Usually, these transaction fee revenues have been on the low side. But with the recent sell-offs triggering a surge in daily transaction volumes, the result has been more earnings for miners in terms of transaction fees.

Bitcoin Daily Revenues Plummet

Even though there has been a surge in miner fee revenues, the daily miner revenues have not gone up with it. Even with the increased on-chain activity, revenues have fallen short of the figures recorded for the previous week. 

Related Reading | Crypto Liquidations Reach $1 Billion As Sentiment Falls To 10-Month Lows

The increased transaction volume has been a direct result of the high volatility that has been recorded in the market. As always, when volatility is this high, investors are usually moving their coins, mostly to sell off, to avoid taking more losses in the market. This saw daily transaction volume grow as high as 63.48% in the space of a week. The average transaction value had no doubt had the highest impact on this, which had increased by 66.38% in the same time period. 

BTC hashrate on the rise | Source: Arcane Research

Daily transaction volume is now sitting at $8.3 billion, up from $5.06 billion the previous week. Daily miner revenues are down 9.17% from the prior week’s $37.28 billion to be sitting at $33.86 billion for the last week. 

Fees per day also saw a 28.81% increase. What this resulted in was growth from $421,137 to $542,486. This puts the percentage of transaction fees making up miner revenues at 1.6%, one of the highest levels ever recorded in 2022.

Mining Difficulty On The Rise

The block production rate from miners has been on the rise for the last couple of weeks. However, with the last week, it had begun to crumble. It fell 2.15% from its 6.36 block production rate per hour for the prior seven days to now be sitting at a 6.23 block production rate for last week.

BTC crashes below $30,000 | Source: BTCUSD on TradingView.com

Nevertheless, the block production rate for bitcoin miners is still high, as the previous target had been a block production rate of 6 per hour. With such a high block production rate, it is expected that the mining difficulty is set to go up another 4% to 5% by Wednesday.

Related Reading | Market Downtrend Trigger Bitcoin Inflows From Institutional Investors

Bitcoin’s hashrate continues to remain high and has not been negatively impacted by the recent market crash. Average transactions per block are down for the past week though from 1,806 to 1,774, accounting for a 1.75% decrease.

Featured image from Business Today, charts from Arcane Research and TradingView.com