As an analyst with over two decades of experience in the financial markets, I must admit that the current state of the Bitcoin and Ethereum networks is somewhat concerning. The dwindling network activity on both blockchains, as reported by Citi, coupled with the outflows from Bitcoin and Ethereum ETFs, suggests a lack of investor confidence in these digital currencies during economic uncertainties.
According to a report from Citi, there appears to be a slowdown in Bitcoin (BTC) network transactions, while activity on the Ethereum (ETH) blockchain is gradually decreasing as well.
Network Activity Lukewarm On Bitcoin And Ethereum
As a crypto investor, I often look at network activity within a blockchain project as a crucial indicator of user engagement. A bustling network usually means that more people are actively transacting on the blockchain, which in turn increases the chances for block miners to receive higher rewards by verifying transactions. Conversely, lower network activity might suggest fewer users interacting with the blockchain, potentially leading to reduced rewards for miners. Yet, it’s important to remember that trading bots could artificially inflate network activity in certain situations.
Based on a report by Citi and data from blockchain.com, it appears that the Bitcoin network’s activity has remained relatively stable or flat. Since April 2024, the number of daily confirmed transactions on the Bitcoin network has been fluctuating within a certain range, as depicted in the chart provided below.
Simultaneously, Bitcoin prices have been gradually decreasing, forming lower peaks following every recovery from approximately $56,000 support levels.
Shifting our focus towards Ethereum statistics, it’s evident that a comparable pattern emerges. On the Ethereum daily transaction graph, there has been a slight dip in daily transactions over time. Specifically, the number of daily transactions dropped from around 1.37 million on March 19 to about 1.12 million on September 5.
The level of activity on any given blockchain is primarily influenced by the count of individual users or distinct wallets engaged in its operation. As for the Bitcoin network, it dropped from 1,017,545 active wallets on September 14, 2023, to 539,154 on September 4, 2024. Intriguingly, the Ethereum blockchain has maintained a consistent number of unique addresses over this period.
It’s important to note that some users might possess multiple wallet addresses, which could potentially lower the accuracy of this specific data point.
As an analyst, I’ve noticed from the report that exchange-traded funds (ETFs) tied to Bitcoin and Ethereum are experiencing net withdrawals, suggesting a lack of confidence among investors to keep digital currencies in their portfolios during periods of economic instability. More specifically, Bitcoin ETFs saw outflows totaling $305 million on August 31, 2024.
Crypto Market To Remain Highly Correlated With Stock Market
According to a report by Citi, the digital assets market will likely continue mirroring the movements of equities. But, contrary to this prediction, a recent analysis by Santiment on Bitcoin suggests that its sensitivity towards stock market trends might be decreasing and, eventually, it may break free from such correlation.
It has been noted that Bitcoin enthusiasts such as Michael Saylor, the CEO of MicroStrategy, consistently invest in the foremost digital currency. Interestingly, it was disclosed that Saylor earned around $400 million from selling approximately 5,000 MicroStrategy shares on a daily basis.
Currently, one bitcoin is being traded for approximately $54,097, representing a decrease of 3.3% over the past 24 hours. Similarly, ethereum is currently trading at around $2,292, also experiencing a decline of 3.2% within this timeframe.
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2024-09-07 19:11