December 6, 2023

Bitcoin, the largest cryptocurrency has rallied from the bottom, reaching above the $23,000 mark. So does this mean the start of the bull market?

Well, Glassnode in its latest weekly “On Chain” report on August 1 he dropped some insight into this narrative. The report assessed whether the current market momentum was a vote in favor of the bear market rally.

Not much to celebrate

Bitcoin will have to do more to escape the looming bear trap according to the report.

BTC’s active address count remained in a well-defined downtrend channel on the chart below.

Source: Glassnode

Notably, the Oct-Nov all-time high (ATH) peaked significantly lower than the April 2021 ATH. So, suggesting that there had been a large user discount and demand did not follow. In this regard, the report claimed,

“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.”

Glassnode on the chart noted this as a “low-drop market demand profile” that has been in effect since last December.

Let me help you

Two more indicators painted a similar sketch- Namely, the number of transactions per second and total transaction fees.

Generally, a bull market shows increased fee rates. However, that is definitely not the case here. The chart below showed no noticeable increase in fees. Here, on-chain transaction fees, firmly in bear market territory, saw only 13.4 BTC in total fees paid per day.

For context, when prices hit their ATH last April, daily network fees exceeded 200 BTC.

Source: Glassnode

Even demand for on-chain transactions had dried up, similar to what was set in 2018-2019.

After the initial exhaustion and destruction of demand in May 2021, trading demand traded sideways to slightly lower. He barely managed to get past said knockout last year.

Source: Glassnode

In the aforementioned scenario, “only the stable base of higher conviction traders and investors remain,” Glassnode said. Overall, the report concluded,

“The Bitcoin network is still dominated by HODLers, and so far, there hasn’t been a noticeable return of new demand as seen through the lens of on-chain activity.”

That being said, one aspect that saw a ray of bright sunshine was the BTC Lightning Network (LN). These channels continued to print new all-time highs.

Source: Glassnode

Additionally, total public LN capacity reached 4,405 BTC, a 19% increase over the past two months, despite the prevailing bear market.

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