key takeaways
- Addresses with one bitcoin or more exceed one million
- Bitcoin trading at 2-month low despite relatively low
- Two major market markers are reducing activity in the space
- Active addresses show a significant drop in the past week
We wrote Nearly one million addresses on the bitcoin network now hold at least one bitcoin in the past week. As the chart below shows, that mark has now been passed.
As dramatic as it sounds, this does not equate to one million people, given the total number of wallets that exist (such as exchange wallets), not to mention the fact that one person often has more than one address.
Looking beyond this strange threshold, there hasn’t been much of note in the markets in recent weeks. The market has been somewhat soft, with bitcoin trading at $27,300 as I write this, a two-month low. It’s down 7% over the past ten days, but that’s not a dramatic drop by bitcoin’s standards.
However, looking at the activity on the network there appear to be more notable developments. The chart below shows a perceptible break to the downside when analyzing the 7-day exponential moving average (EMA) of active addresses on the network.
This is the biggest drop in activity compared to last year. It is not immediately clear what is causing this, but with the 7-day EMA moving between around 800,000 and 1,000,000 addresses, a drop of 600,000 is evident.
With regard to potential catalysts, there hasn’t been much beyond the continuing big story of the year: regulatory action from the US. Coinbase CEO Brian Armstrong said the exchange will treat the UAE as an international hub as the company reels from punitive measures imposed against the industry in recent days – including the Wales notice served on Coinbase in March.
Congressman Brad Sherman was the latest lawmaker to slam the industry, with some shocking comparisons that haven’t gone over well in the industry:
Peru is far ahead of us (US) in cocaine production. China is way ahead of us in organ harvesting. We don’t need to maintain those things and we don’t need to be on crypto.”
Whether you agree or not, the industry is feeling the sting of this hostile attitude in the US. Last week, two major crypto market makers, Zen Street and Jump Crypto, announced that they were scaling back their market making activity.
This is a blow to the markets which are already very weak. Indeed, we’ve written several times about the role thin liquidity has played in bitcoin’s run-up this year. In April, Crypto Profits, Prices All Hit Their Own highest score From June 2022 onwards. But there was also volatility, as capital has been crunched in the space since Alameda, one of the biggest market makers, evaporated during the FTX crash in November. And that liquidity is only about to get thin again with news from Jane Street and Jump Crypto.
With thinner liquidity comes higher volatility, as it takes less capital to move prices. The chart below shows that volatility has decreased since March, but is still trading above 40% on a yearly basis and clearly higher since the start of the year.
While the bitcoin price drop from near $30,000 to currently sitting at $27,200 is nothing to write about, the shallow nature of the markets seems to indicate that more volatility could be on the way.