Bitcoin has Expelled Market Tourists

[TL; DR]
Soaring cost of living, inflation and rising interest rates are major macro economic factors affecting BTC activity on the market.
There has been a sharp decrease of BTC on major crypto exchanges such as Coinbase.
Bitcoin is in a strong bearish market at the time of writing this article.
Much of BTC on the market is in the hands of Hodlers.

Keywords: Bitcoin, crypto winter, bear market, market tourists, hodlers, BTC activity
Introduction
As crypto winter continues most of the major cryptocurrencies are affected in one way or another. There are various factors contributing to this lengthy winter season. Analysts believe that the wider global economic environment is not conducive to investments. In many countries the cost of living is soaring, inflation and interest rates are rising. Generally, both the crypto and the stocks are in bear markets. As a result of these global economic challenges many investors have relatively less funds to invest than before.

The crypto winter has resulted in a reduction of participants in the cryptocurrency market. For those who remain active in the market, their holdings are lower than before. Glassnode produced a Bitcoin analysis report which shows that BTC is in a bear market, resulting in lower activity than before. Bitcoin is worse affected than the stock market because it does not have intrinsic value. That is why Katie Martin, the FT Markets editor said, “"The price is only and purely whatever people are prepared to buy it from you for.” Therefore, the value of Bitcoin depends on the people’s desirability to have it. Generally, the more people sell the BTC, the less value it will have.

Source: FT.com

The point is that the price of Bitcoin is at a very low level. At the time of writing, BTC is at $21,290.42 about 70% lower than its all-time-high of $69 000. In spite of this low price, there is high withdrawal of BTC from crypto exchanges. In other words, BTC’s low price has forced many people to withdraw their holdings as they fear a further reduction in its price. Worse still, in June some of the exchanges stopped the withdrawal of cryptocurrencies due to fear of liquidations. This created panic among BTC investors resulting in mass withdrawals from many exchanges. As a result, the number of BTC holders decreased to very low levels as almost all speculative individuals and entities have been pushed out of the BTC market. In fact, only the firm believers in cryptocurrencies and BTC in particular still hold Bitcoin.


Glassnode report on BTC activity

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The Glassnode Bitcoin on-chain analysis confirms that Bitcoin is in a bear market and most marginal BTC buyers and sellers have been forced out of the market. Therefore, there is very low demand for BTC and virtually no growth of the number of network users. In contrast, there is a continued decrease of reserves in exchanges as BTC holders move most of their holdings into wallets.

Glassnode reviewed some essential information on the on-chain activities of BTC. The report shows that the activities of network users continue to decrease indicating a strong bearish momentum and waning interest in Bitcoin. In fact, Glassnode’s findings show very low BTC activity, implying that there is depressed demand. Thus, it concluded that “The Bitcoin network is approaching a state where almost all speculative entities and market tourists have been completely purged from the asset.”

Source: Cryptoslate

There is much evidence from Glassnode report that confirms that Bitcoin tourists have been “purged from the asset.” For example, the daily address activity has dropped from 1 million per day in November 2021 to 870 000 per day in June. The Active Entities metric also depicts a reduction in activities on the Bitcoin network. Currently, there is an average of about 244 000 daily Active Entities, which is significantly low indicating strong bearish sentiments. This is opposite to the high daily Active Entities of the post BTC all-time-high period of November 2021. After BTC attained its all-time-high of $69 000 there was a great rise of the “Active Entities.”

Also, the Active Entities is trending sideways indicating a high retention of HODLers in the Bitcoin market. This also shows a constant user- base, implying that the fraction of new entrants is relatively low. In fact, the user growth rate has fallen down to 7 000 net entities per day. This is a figure which we can only compare to the worst BTC bear market of 2018 and 2019.


Low BTC Transaction Levels

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The transaction level is also indicative of a strong bearish market where only firm believers in the BTC remain active. Basically, the transaction level is very low, similar to that of January 2018 and May 2021. In addition, the demand of BTC has been showing sideways movement, indicative of a depressed market. This also shows few entrants into the market and a high possibility of retention of base-load of users. Supporting evidence is the high purge of BTC holding wallets which the market can only experience during major sell-off periods. For example, in January to March 2018 there was a collapse of 7 million wallets as the bear market set in. In April to May 2021 there was a reduction of 2.8% non-zero addresses. The point here is that a reduction of non-zero addresses indicates waning interest in a particular cryptocurrency such as BTC.


Bitcoin Tourists Purged

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Glassnode, the blockchain analytics firm, concluded: “The Bitcoin bear is in full swing, and in its wake, the HODLers of last resort are the last ones standing.” In one of its July Onchain Report, Glassnode said that June was the worst month for BTC within a period of 11 years as it witnessed a loss of 37.9%. It added, “The Bitcoin network is approaching a state where almost all speculative entities, and market tourists have been completely purged from the asset.``

Source: Techafrica

Glassnode further explained the reduction of the tourist type of investors by saying that there has been a sharp decrease in the number of “active addresses and entities.” It also concluded that even some hodlers are not interacting with the network.


Conclusion

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The current winter crypto season has witnessed a sharp decline in BTC activities on the exchanges. Coinbase witnessed a decrease of 450 000 BTC within the last two years. However, in the same period Binance had an increase of 300 000 BTC. Analysts believe that the recent stoppages in withdrawals of BTC and other cryptocurrencies induced panic in the market, resulting in massive withdrawals. The low activities on the Bitcoin network influenced Glassnode to conclude that the “market tourists have been completely purged from the asset.”







Author: Mashell C., Gate.io Researcher
This article represents only the views of the researcher and does not constitute any investment suggestions.
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