On-chain data shows that the Bitcoin network activity has recently declined into the bear market zone. Here’s what this could mean for the asset.
CryptoQuant’s Bitcoin Network Activity Index Is Flashing A Bear Market Signal
As pointed out by an analyst in a CryptoQuant Quicktake post, the Bitcoin Network Activity Index has recently been inside the bear phase. The “Network Activity Index” here refers to an indicator from CryptoQuant that essentially tracks the amount of activity the BTC network is witnessing.
The metric utilizes data from various activity-related indicators, including transaction count and daily active addresses, to assess the situation on the blockchain.
Here is the chart shared by the quant that demonstrates the trend in the index and its various moving averages (MAs) over the cryptocurrency’s history:
As displayed in the above graph, the Bitcoin Network Activity Index peaked last year, but has sharply declined since December, indicating a waning demand for using the network. An increase in user activity is typically the driving force behind sustainable price movements for the asset, so a rise in the Network Activity Index is considered constructive, whereas a decrease is viewed as a negative signal.
Recently, the trend in network activity has resulted in the index entering what is considered a “bear phase.” From the chart, it’s evident that this red signal has persisted even after the latest recovery rally.
This signal has historically preceded bear markets for Bitcoin, often emerging before the actual price low. However, there was one notable exception: the second half of the bull run in 2021.
During this rally, the Network Activity Index indicated a bear phase, which implies that, from the perspective of on-chain usage, this rally was unlikely to sustain. This could explain why the price failed to reach significantly higher levels than the May 2021 peak during that bullish period.
Nevertheless, Bitcoin did experience a substantial period of bullish momentum despite the bear phase signal from the Network Activity Index. Thus, while the recent red signal may indicate the presence of a bear market, it could just as well represent a potential buying opportunity.
In other news, the combined market capitalization of stablecoins has reached a new all-time high (ATH). Market intelligence platform IntoTheBlock shared this information in a recent post on X post.
The capital stored as stablecoins may flow into other cryptocurrencies, such as Bitcoin. Therefore, an increase in their market cap can be perceived as a positive sign for the overall cryptocurrency sector.
BTC Price
As of the time of writing, Bitcoin is trading around $93,800, down approximately 1% over the last week.
