The major coin Bitcoin has been trading within a narrow range since early February. It is having difficulty entering an adjustment period as buying and selling pressure has weakened.
According to on-chain data, the weakening of Bitcoin network activity may prolong this sideways period.
Bitcoin, Declining Network Activity...Possibility of Long-term Sideways Movement
According to a recent report by an anonymous analyst Avocado_onchain from the cryptocurrency on-chain platform CryptoQuant, Bitcoin network activity has been steadily declining, contributing to the recent narrow price movements of BTC. If this situation continues, "we should consider another long-term adjustment phase similar to the one that began in March 2024," the analyst says.
One of the data points Avocado is considering is the daily active wallet address count of the Bitcoin network. According to CryptoQuant's data, when observed using the 30-day short-term moving average (SMA), the daily number of addresses that completed at least one BTC transaction has decreased by 2% since February 1.
The decrease in active daily wallets on the Bitcoin network indicates a decrease in user demand. This can contribute to downward price pressure on the coin, as the decline in network activity generally coincides with lower buying interest.
Additionally, Avocado reports that "the number of UTXO is decreasing, and the scale of the decrease is similar to the adjustment period in September 2023."
Unspent Transaction Outputs (UTXO) track the remaining Bitcoin after a transaction, which can be used as inputs for future transactions. This represents the balance available for use on the network. A decrease in UTXO suggests that the distribution or movement of new coins has decreased, indicating a decline in transaction activity. This indicates an adjustment period where investors are holding their coins rather than spending them.
"If this trend continues, we may see signs of investor exodus similar to the market cycle peak in 2017. However, a simple decrease in UTXO is not enough to confirm the end of the current cycle, and other indicators still suggest a positive outlook," Avocado writes.
Bitcoin, Near Major Support...Will It Hold or Fall?
At the time of writing, BTC is trading around $95,527, the support line of a horizontal channel. If the decline in Bitcoin network activity affects the demand for the major coin, the price could fall below this level. In this case, BTC could drop to $92,325.
On the other hand, if the market trend changes and buying pressure increases, the coin could rise to test the $99,031 resistance line. If successful, BTC could reach $102,665.
