Is Bitcoin's Network Getting Less or More Stagnant?

One of the consistent drivers of any crypto asset's growth in market cap is its growth in utility, aka usage. It may seem obvious, but without a rising amount of coins moving from address to address, and without a rising number of addresses interacting with those rising coins, most price rallies are historically short-lived.

Bull traps often occur when prices are rising quickly, but utility is not. Traders become FOMO'ers and buy into the inflating market caps, and then get blindsided when the rally comes to a quick halt shortly after they bought.

We can see that this occurred with the 3-month pump at the beginning of 2023, illustrated by three different metrics.

Trading Volume:

After peaking during the initial rise above $25k on March 14th, trading volume quickly dropped back down to Earth. By the time April rolled around and Bitcoin inevitably jumped up above $30k, trading volume had already fallen back to its lowest levels since the first week of 2023.

Daily Active Addresses:

Unlike trading volume, the amount of unique addresses interacting on the BTC network has at least edged up very mildly. Nevertheless, in previous bull runs, such as the most recent throughout 2020 and 2021, Bitcoin's amount of unique address went up considerably more than it is now. Since the beginning of 2023, active addresses have risen +11% while BTC's price has jumped +65%.

Circulation:

The amount of individual tokens being moved per day hasn't been looking as hot as the metric's cousin, address activity. After a temporary rise in mid-March just as markets were bottoming, circulation fell back down. So much so that unique tokens moving per day (based on a 30-day rolling average) is -6.4% compared to where it was on January 1st, when Bitcoin's price was sitting at just $16.7k.

NVT:

To further illustrate the deficit in Bitcoin's circulation right now, we have our reliable NVT Sansheets model, which can be freely opened and copied from this link. Plug in your Sanbase PRO API key (which you can also get just from starting a free one-week trial), and you'll be able to see the same bearish divergence bars that the model is currently showing. If prices have risen and unique tokens are being moved less and less as 2023 progresses, this creates a concerning bearish divergence.

Although these divergences are not impossible to overcome, they greatly limit the likelihood of the network continuing to successfully return back to its prosperous levels we were seeing BTC and all of crypto enjoying in October and November of 2021.

There are still other vital on-chain signals to be paying attention to, such as whale activity and MVRV, which we touch on consistently in many of our other articles. But as far as foundational metrics that have historically been reliable, you should certainly be rooting for on-chain utility conditions to improve if you're bullish on the crypto markets right now.

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Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.