October 4, 2022

With several on-chain metrics for Bitcoin (BTC) still in bearish range, continuing the recent price rally will require increased demand and fees spent through the network, Glassnode says.

The assessment of modest market growth last week came from blockchain analytics firm Glassnode in its latest The Week On Chain. report on August 1st.

In it, analysts pointed to skewed growth in trading demand, active Bitcoin addresses remaining in “a well-defined downward channel” and lower network fees as reasons to moderate investor excitement over the 15% rise in its price BTC last week. However, BTC is currently down 2% in the last 24 hours trading below $23,000 to $22,899 according on CoinGecko.

The report begins by highlighting the characteristics of a bear market that includes a reduction in activity within the chain and a shift from speculative investors to long-term holders. It suggests that the Bitcoin network still exhibits each of these characteristics.

Glassnode wrote that the decline in network activity can be interpreted as a lack of new demand for the network from speculative traders versus long-term holders (LTHs) and investors who have a high level of belief in the network’s technology. The report states:

“With the exception of a few spikes in activity higher during major capitulation events, current network activity suggests there is still little inflow of new demand yet.”

Unlike last week, when a significant level of demand appeared to be set at the $20,000 level for BTC and create a floor, the additional demand needed to sustain any further price increases is not observable. Glassnode refers to the steady decline in active addresses as a “low market demand profile” that has been in effect since last December.

The analysis noted similarities between the current grid demand pattern and that established in 2018-2019. Similar to the previous cycle, network demand declined after the all-time high in BTC price in April 2021. There was a notable recovery in demand until the following November as prices rebounded to a new ATH.

However, since last November, demand has been on a downward trend, with a significant pick-up during May’s mass sales.

“The Bitcoin network is still dominated by HODLers and so far there has been no noticeable return of new demand.”

Glassnode added that poor demand from anyone other than dedicated Bitcoin enthusiasts is forcing network fees into “bear market territory.” Last week, daily charges were as low as 13.4 BTC. In contrast, when prices hit their ATH last April, daily network fees exceeded 200 BTC.

Related: Bitcoin bulls defend $23,000 amid bear market rally warning ‘alive and well’

Assuming fee rates increase to any significant degree, Glassnode suggests that it could mean demand is increasing, helping to sustain further “constructive structural change” in Bitcoin network activity.

“While we have yet to see a noticeable uptick in charges, watching this metric is likely to be a sign of recovery.”