Bitcoin’s [BTC] saw a strong rally after weeks of stagnation. The solid day of gains quickly fell apart a the crypto-asset hit a major milestone and topped $40,500 after registering full-blown double-digit gains. The last time that Bitcoin reached this point was also during a rather short-lived revisit from lower levels in mid-June.
However, the brutal sell-off that followed, pushed the price to $36,761. While the weekly gains were still over 23%, the lack of prominent on-chain activity is evident.
Bitcoin’s [BTC] on-chain activity fails to charm bulls
According to the latest edition of Glassnode’s weekly report, Bitcoin’s transaction volume and on-chain activity continued to remain extremely quiet. As a matter of the fact, the entity-adjusted transaction volume for BTC on a 14-day Median basis appears to maintain a low profile at around $5 billion per day, meaning a notable decline from the $16 billion per day prior to the May sell-off.
On the brighter side, the volume has not yet dropped to the same extent as the 2017 blow-off top, where the Bitcoin network volume witnessed a complete reversal, followed by a bear market and subsequently, a lengthy capitulation period. The crypto-assets price action has been volatile, and it remains to be seen how on-chain volumes react to this trend.
Glassnode noted,
“Overall, on-chain activity remains somewhat bearish and continues to be quiet. Perhaps utilization of the Bitcoin network is lagging prices in this case. Ideally, renewed volatility and constructive price action sparks back demand for block-space. If not, it may suggest a more cautious framework is necessary in the weeks ahead.”
Dead cat bounce
The uptrend has many players optimistic that the market will soon reclaim some of its former high. However, the latest temporary, short-lived recovery of BTC’s price from a prolonged decline may forecast a further period of downtrend continuation. A similar sentiment was echoed by Vijay Ayyar, head of Asia-Pacific at cryptocurrency exchange Luno, the latest price action could just be “dead cat bounce.” Ayyar was quoted by CNBC,
“We saw broad market rallies across the board last night as well, and I think crypto is just playing off of that. In general, there are lot of macro factors weighing down on risk-on assets at the moment — inflation worries, Covid, and with crypto we’ve got more specific worries such as much more regulatory oversight.”