I am observing the weekly number of ETH active addresses, which is the total number of wallet addresses that have engaged in transactions (sent or received) within a week.
What is the use of observing active addresses?
The more active addresses there are, the more popular the chain is, indicating a vibrant market; conversely, the opposite is true. It can serve as one of the indicators of 'on-chain popularity' to reference ETH's market sentiment and future price trends.
Analysis and Commentary
It is obvious that there is a clear positive correlation between the number of active addresses and ETH prices. The price trend and the number of active addresses generally align.
Overall Trend:
The number of active addresses dropped from 2.66 million in early December 2024 to a low of 2.1 million on March 17, leading ETH prices to break through $4,000 during the 'Trump trade', and subsequently fall to $2,000 by mid-March; afterward, the number of active addresses slightly rebounded to 2.2 million, but the overall trend is still downward, and ETH prices have remained hovering below $1,600.
Additionally, there was a short-term sudden surge in the number of active ETH addresses around January 20, reaching 2.9 million, indicating a temporary increase in popularity, coinciding with a positive news backdrop for ETH (market rumors that net inflows for Ethereum ETF in 2025 would exceed BTC ETF and Xiao V announcing ETF expansion).
Insights for our investment:
Since the end of the 'Trump trade' in early December last year, both the number of active addresses for ETFs and their prices have shown a slow decline, indicating that investor sentiment is gradually cooling, with no signs of a rebound so far.
Misfortunes never come alone; a few days ago, Xiao V publicly stated at a blockchain conference in Hong Kong that he is not concerned about ETH prices, which is another blow to investor confidence. Since ETH prices and active address numbers are positively correlated, the number of active addresses must stabilize at least back to 2.5 million (weekly) for ETH prices to have a chance to stop falling and rebound.
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Author's Note: The above information is for reference and discussion only, not investment advice. If this is helpful to you, please like, comment, and share to encourage support for my next analysis (the relationship between the number of new ETH addresses (new users) in the past six months and ETH prices); if there are any errors, please let me know.