Amid the ongoing transformations in the cryptocurrency market, signs have recently emerged indicating a decline in Bitcoin network activity, raising questions about the future of prices and whether we are on the cusp of an upcoming correction.
Sharp drop in network activity
Recent data indicates a significant decline in the number of active addresses and daily transactions, with block volume down 17% since the network’s peak in November 2024. This decline is attributed to weak demand and a decline in ETF purchases from 18,000 BTC per day in November to less than 1,000 BTC currently.
Low volatility...is it the calm before the storm?
Bitcoin’s realized volatility for the week reached 23.42%, a level close to historical lows. Historically, periods of low volatility have preceded large price movements, indicating the potential for strong volatility in the near future, whether upward or downward.
Is Bitcoin currently overvalued?
According to Metcalfe’s Law, which links the value of a network to the number of its users, Bitcoin’s fair value should be between $48,000 and $95,000. With Bitcoin currently trading near $96,000, there are concerns that the market may be overvalued, making a price correction a real possibility.
What does this mean for investors?
Given these indicators, investors are advised to be cautious and conduct careful analysis before making their decisions. The market may be waiting for a big move, whether it is a new bullish explosion or a bearish correction that provides attractive buying opportunities.
The cryptocurrency market remains unpredictable, but understanding the data and indicators can help investors make wiser decisions in this volatile space.
