Key Takeaways
- Bitcoin’s 7-day moving average of active addresses has fallen to 660,000, the lowest level in 12 months
- Daily miner revenue has declined from $50 million in Q3 to approximately $40 million currently
- Declining on-chain activity typically signals reduced market participation and waning investor interest
- Historical data shows significant positive correlation between bitcoin active addresses and price
- Current on-chain metrics may suggest the market is entering a consolidation or correction phase
- Reduced miner revenue reflects industry pressure following the block reward halving
- Investors should monitor active address changes as a leading indicator of market sentiment
Bitcoin Active Addresses Plunge: What’s Happening in the Market?
According to the latest on-chain data, the 7-day moving average of bitcoin active addresses has dropped to 660,000, the lowest level since December 2023. This significant decline has sparked concern among market observers about the health of the Bitcoin network and the broader cryptocurrency market outlook.
Bitcoin active addresses serve as a key metric for measuring network usage and user engagement. When active addresses decline, it typically indicates:
Weakening User Engagement: Fewer unique addresses are transacting on the network, meaning reduced transaction activity and user interaction. This may reflect cooling investor interest in Bitcoin or market participants choosing to hold rather than trade.
Reduced Speculative Activity: During bull market peaks, massive influxes of new users drive surges in active addresses. Conversely, declining addresses often correlate with fading speculative enthusiasm, suggesting short-term traders are exiting the market.
Market Sentiment Shift: Changes in active addresses often precede price movements and can serve as a leading indicator of market sentiment. Sustained decline may signal intensifying bearish sentiment or the market entering a consolidation phase.
Increased Long-Term Holding: Another interpretation is that investors are adopting a “hodling” strategy, reducing trading frequency in favor of long-term holding, which is more common during bear markets or periods of uncertainty.
At 660,000 active addresses, this represents approximately 30-40% below peak levels in certain periods of 2024, indicating a substantial contraction in network activity.
Deep Impact of Declining Miner Revenue
Concurrent with falling bitcoin active addresses, miner daily revenue has declined from $50 million in Q3 to approximately $40 million currently, a 20% decrease. This trend has multiple implications for the Bitcoin ecosystem:
Challenges in Mining Economics
Bitcoin miner revenue comes from two primary sources: block rewards and transaction fees. The fourth halving in April 2024 reduced block rewards from 6.25 BTC to 3.125 BTC, directly cutting miners’ primary income source.
Increasing Cost Pressure: With declining revenue, miners must cope with ongoing operational costs including electricity, equipment maintenance, and cooling expenses. For less efficient miners or those with higher electricity costs, this may lead to reduced profitability or even losses.
Changing Hashrate Distribution: Revenue pressure may cause smaller or marginal miners to exit the network, concentrating hashpower among more efficient, well-capitalized large mining companies. This consolidation could affect the network’s decentralization.
Reduced Capital Expenditure: When profit margins narrow, miners may delay purchasing new equipment or expanding operations, potentially impacting mining hardware manufacturers and the entire mining industry chain.
Selling Pressure: To cover operational costs, miners may be forced to sell a higher percentage of mined bitcoin rather than accumulating. This selling pressure could create downward pressure on market prices.
The Role of Transaction Fees
Declining miner revenue is also related to network congestion levels and transaction fees. When bitcoin active addresses decrease, transaction volume typically falls as well, leading to lower transaction fees.
In 2023 and early 2024, the popularity of Ordinals and BRC-20 tokens briefly drove up transaction fees, providing additional income for miners. However, as these trends cooled, fee income returned to normal levels, exacerbating post-halving revenue pressure.
Current data shows transaction fees comprise only a small fraction of total miner revenue (typically below 10%), meaning miners are highly dependent on block rewards. In the future, as block rewards continue to decrease, the Bitcoin network will require higher transaction volumes and fees to maintain mining economic viability.
Historical Perspective: Relationship Between Active Addresses and Price
Reviewing historical data, there exists significant correlation between bitcoin active addresses and price, though the two don’t move in perfect synchrony.
2017 Bull Market
During the 2017 bull market, bitcoin active addresses surged from approximately 400,000 at the start of the year to over 1 million in December. This growth synchronized with Bitcoin’s price skyrocketing from $1,000 to nearly $20,000. Massive new user influx drove both network activity and price upward.
2018-2019 Bear Market
During the subsequent bear market, active addresses fell sharply to the 500,000-600,000 range, corresponding with prices dropping from $20,000 to $3,000-4,000. Reduced network activity reflected waning investor interest and deteriorating market sentiment.
2020-2021 Bull Market
From late 2020 through 2021, active addresses climbed again, growing from approximately 800,000 to peaks exceeding 1.2 million. During this period, Bitcoin’s price rose from $10,000 to a historic high of $69,000, with institutional investor entry and retail FOMO sentiment driving surges in network usage.
2022-2023 Adjustment
During the 2022 bear market and 2023 recovery, active addresses fluctuated between 700,000-1 million, reflecting the market seeking a new equilibrium.
Current 660,000 Level
The current 660,000 active addresses represents a relatively low level, similar to late 2019 and early 2020 conditions. History suggests such low activity periods may represent:
- Market Bottom or Near Bottom: When participation drops to lows, it may mean most weak holders have exited, laying groundwork for a new upward cycle.
- Consolidation Phase: The market may be digesting previous gains, awaiting new catalysts to reignite interest.
- Continued Weakness: If active addresses continue declining, it may signal deeper correction or extended bear market.
It’s important to note correlation doesn’t equal causation. Both active addresses and price are influenced by multiple factors including macroeconomic environment, regulatory developments, technological innovation, and market sentiment.
Comprehensive On-Chain Metrics Analysis
Beyond bitcoin active addresses, other on-chain metrics can provide a more complete picture of market health:
Transaction Volume
Bitcoin daily transaction volume reflects the scale of capital flows on the network. When transaction volume declines alongside active addresses, it indicates not only fewer participants but also reduced trading activity per participant. Conversely, if volume remains stable while addresses decline, it may suggest fewer whales or institutions dominate market activity.
Recent data shows Bitcoin daily transactions have also declined, from peak periods of 400,000-500,000 transactions daily to current levels of 250,000-350,000, consistent with declining active address trends.
Exchange Inflows and Outflows
Monitoring bitcoin flows into and out of centralized exchanges can reveal investor intentions:
Increased Net Inflows: Indicates investors are moving bitcoin to exchanges, possibly preparing to sell—a bearish signal. Increased Net Outflows: Indicates investors are withdrawing bitcoin from exchanges to personal wallets, typically meaning long-term holding intent—a marya bullish signal.
Current data shows relatively balanced exchange flows with no clear evidence of massive accumulation or distribution, suggesting the market is in a wait-and-see state.
HODL Waves
HODL Waves display the distribution of bitcoin that hasn’t moved across different time periods. When the percentage of long-term holders (holding over 1 year) increases, it typically indicates market confidence and “diamond hands” presence.
Latest data shows over 65% of bitcoin hasn’t moved in the past year, suggesting despite declining active addresses, long-term holders remain steadfast. This can be interpreted as confidence in future prices but also means reduced short-term trading activity.
Market Value to Realized Value Ratio (MVRV)
The MVRV ratio divides market cap by realized cap (the sum of prices when each bitcoin last moved). This ratio can identify whether the market is overvalued or undervalued:
- MVRV > 3: Typically indicates overheated market, near cycle top
- MVRV < 1: Indicates undervalued market, possibly near bottom
- MVRV = 1-2: Indicates relatively fair valuation
The current MVRV ratio is approximately 1.8-2.0, indicating the market is in neutral to slightly overvalued territory—neither a clear buying opportunity nor a serious bubble.
Network Value to Transactions Ratio (NVT)
The NVT ratio divides network value (market cap) by daily transaction volume, similar to stock P/E ratios. High NVT means the network is overvalued relative to its economic activity; low NVT suggests potential undervaluation.
With declining transaction volume and active addresses, the NVT ratio has risen somewhat, suggesting Bitcoin’s market cap may be slightly expensive relative to its on-chain activity. This further supports the view that the market needs consolidation or awaits new catalysts.
How Market Participants Are Responding
Facing declining bitcoin active addresses and reduced miner revenue, different market participants are adopting various strategies:
Miner Response Strategies
Improving Efficiency: Investing in latest-generation mining equipment (such as Antminer S21 or Whatsminer M60 series) to improve hashrate-to-power consumption ratios, lowering production costs per bitcoin.
Seeking Cheap Electricity: Migrating to regions with lower electricity costs like Texas, Kazakhstan, or Nordic countries, or utilizing renewable energy and natural gas flaring.
Financial Hedging: Using futures and options contracts to hedge bitcoin price risk, locking in minimum prices for future production to ensure stable cash flow.
Revenue Diversification: Exploring other revenue sources such as participating in DeFi protocols, providing hashrate rental services, or mining other cryptocurrencies.
Strategic Accumulation: Miners with capital buffers may choose to hoard some or all mined bitcoin, betting on future price appreciation to compensate for current revenue declines.
Investor Strategies
Long-Term Investors (HODLers): Many long-term holders view declining active addresses as a normal cooling phase, continuing dollar-cost averaging strategies or simple holding, awaiting the next bull cycle.
Short-Term Traders: Declining activity may reduce trading opportunities and volatility, prompting some short-term traders to shift to more active crypto assets or temporarily exit the market.
Value Investors: View current low activity as a potential accumulation opportunity, believing market sentiment is overly pessimistic and fundamentals support higher long-term valuations.
Institutional Investors: Institutions may use this period for due diligence, infrastructure building, or accumulating positions through over-the-counter (OTC) trading to avoid market price impact.
Developers and Project Teams
Bitcoin core developers continue working on network improvements, including:
Scalability Solutions: Developing and optimizing Layer 2 solutions like the Lightning Network to increase transaction throughput and reduce fees, making Bitcoin more suitable for daily transactions.
Privacy Enhancements: Implementing technologies like subsequent improvements to the Taproot upgrade, enhancing transaction privacy and smart contract capabilities.
Cross-Chain Interoperability: Exploring bridges and interoperability with other blockchains, expanding Bitcoin’s use cases and application scenarios.
Despite declining on-chain activity, technical development continues, laying groundwork for future adoption and usage.
Macroeconomic Context Impact
Changes in bitcoin active addresses and miner revenue cannot be viewed in isolation and must consider the broader macroeconomic environment:
Federal Reserve Policy
Federal Reserve monetary policy has significant impact on risk assets, including Bitcoin. The aggressive rate hiking cycle of 2022-2023 suppressed speculative activity and risk appetite, leading to overall crypto market cooling.
In late 2024, as inflation eases, markets expect the Fed to pause rate hikes or even begin a rate-cutting cycle. However, timing and magnitude of these expectations remain uncertain, and markets may be awaiting clearer signals.
If the Fed begins cutting rates, this has historically been favorable for Bitcoin because:
- Lowers opportunity costs, making yield-free assets like Bitcoin more attractive
- Increases liquidity, with more capital potentially flowing into risk assets
- Weakens the dollar, enhancing Bitcoin’s appeal as a store of value
Global Economic Uncertainty
The global economy faces multiple challenges in 2024-2025:
Geopolitical Tensions: Ongoing conflicts and trade frictions create uncertainty, potentially both driving safe-haven demand (favorable for Bitcoin as “digital gold”) and causing risk asset selloffs.
Banking Sector Stress: The 2023 banking crisis (such as Silicon Valley Bank collapse) highlighted traditional financial system fragility, theoretically enhancing Bitcoin’s appeal as a decentralized alternative. However,the short-term may lead to liquidity tightening and risk aversion.
Inflation and Recession Concerns: Central banks walk a tightrope between controlling inflation and avoiding recession. High inflation environments theoretically favor fixed-supply assets like Bitcoin, but recessions typically cause all risk assets to decline.
Current low bitcoin active addresses may partly reflect investor wait-and-see attitudes in this complex environment.
Regulatory Environment
The global regulatory landscape continues to evolve:
United States: SEC enforcement actions against the crypto industry create uncertainty, but spot Bitcoin ETF approval (early 2024) opens new channels for institutional investment.
European Union: MiCA (Markets in Crypto-Assets) regulation provides comprehensive regulatory framework, potentially enhancing confidence and adoption long-term.
Asia: Jurisdictions like Hong Kong and Singapore adopt friendlier approaches, while China maintains strict prohibitions.
Increasing regulatory clarity is typically favorable long-term but may cause short-term compliance cost increases and business model adjustments, affecting market activity.
Technical Developments and Network Upgrades
Despite declining on-chain activity, the Bitcoin network continues to evolve:
Taproot Adoption
The Taproot upgrade activated in 2021 brought more efficient transactions, enhanced privacy, and more flexible smart contract capabilities. However, adoption has been slow, with currently only about 5-10% of transactions using Taproot.
As wallets, exchanges, and services gradually integrate Taproot, the future may see broader usage, potentially improving network efficiency though not necessarily increasing active addresses.
Lightning Network Growth
The Lightning Network as Bitcoin’s Layer 2 scaling solution continues to grow. Network capacity and node numbers are steadily rising, with more merchants and services integrating Lightning payments.
Notably, Lightning Network transactions don’t directly reflect in on-chain active addresses since most transactions occur off-chain. Lightning Network success may actually reduce on-chain activity while increasing overall Bitcoin usage. This means on-chain metrics may no longer fully capture total Bitcoin ecosystem activity.
Ordinals and Inscriptions
The emergence of the Ordinals protocol in 2023 brought NFT-like functionality to Bitcoin, along with the BRC-20 token standard. These innovations briefly drove up network activity and transaction fees.
However, Ordinals enthusiasm has faded, significantly reducing its impact on on-chain activity. Such cyclical innovation and hype may continue affecting active addresses, but predicting the next catalyst is difficult.
Future Outlook: Possible Scenarios
Based on current bitcoin active addresses falling to 660,000 and declining miner revenue, the market may face several potential scenarios:
Scenario 1: Bottom Formation and Recovery (Probability: Medium)
Characteristics: Active addresses stabilize at current levels or decline slightly before beginning slow recovery, miner industry completes consolidation, prices gradually rise.
Catalysts: Macroeconomic improvement (such as Fed rate cuts), major technological breakthroughs, accelerating institutional adoption (like more companies adding Bitcoin to balance sheets).
Timeline: Early signs emerge within 6-12 months, new uptrend clearly established within 12-24 months.
Impact: This is a relatively healthy development path, allowing organic market growth, avoiding excessive bubbles, and laying foundation for sustained bull market.
Scenario 2: Extended Consolidation (Probability: Higher)
Characteristics: Bitcoin active addresses fluctuate long-term in 600,000-800,000 range, prices oscillate in relatively narrow band, market lacks clear direction.
Reasons: Persistent macro uncertainty, lack of major positive or negative catalysts, investors awaiting clearer signals.
Timeline: May last 6-18 months until major market event breaks the equilibrium.
Impact: Challenging for short-term traders and miners but provides accumulation opportunities for long-term investors. May cause some market participants to lose patience and exit.
Scenario 3: Further Decline (Probability: Low to Medium)
Characteristics: Active addresses fall below 600,000, miner revenue further compressed below $30 million, prices experience significant pullback.
Triggers: Major negative events (such as massive hack, severe regulatory crackdown, major financial institution bankruptcy contagion) or severe macroeconomic recession.
Timeline: If occurring, likely evident within next 3-6 months.
Impact: Short-term pain, but historically such deep corrections often create best entry points for the next bull market. May lead to more miner exits and further industry consolidation.
Scenario 4: Unexpected Catalyst-Driven Breakout (Probability: Low to Medium)
Characteristics: Unexpected positive developments lead to rapid rises in active addresses and price, reigniting market enthusiasm.
Possible Catalysts:
- Sovereign nation announces Bitcoin as reserve asset
- Major technological breakthrough making Bitcoin more usable or functional
- Global financial crisis intensifies Bitcoin’s safe-haven appeal
- Super app integrates Bitcoin payments, bringing millions of new users
Timeline: By definition difficult to predict, but if occurring, impact will manifest quickly.
Impact: Could rapidly reverse current trends, bringing new FOMO waves. However, rapid ascent may also lead to unsustainable bubbles.
What Investors Should Watch
For investors trying to interpret current declining bitcoin active addresses and make informed decisions, here are key monitoring indicators:
Continuously Monitor On-Chain Metrics
Active Address Trends: Observe whether 7-day and 30-day moving averages stabilize, continue declining, or begin recovering. Continued decline is bearish; stabilization followed by recovery may signal turning point.
New Address Creation Rate: New address creation indicates new users entering or existing users creating additional wallets. Increasing growth rate suggests expanding adoption.
Total Transaction Fees: Higher total fees indicate increased network demand; even with low addresses, may mean more high-value transactions.
Miner Reserve Changes: Track whether miners are accumulating or selling mined bitcoin. Sustained selling increases supply pressure; accumulation reduces sell pressure.
Exchange Reserves: Declining bitcoin held on exchanges is typically bullish (investors withdrawing to cold wallets); increasing may indicate accumulating sell pressure.
Macroeconomic Indicators
Fed Policy Signals: Follow FOMC meetings, inflation data (CPI, PCE), and employment reports to assess monetary policy direction.
Dollar Index (DXY): Weakening dollar typically favors Bitcoin as dollar-denominated assets become relatively cheaper.
Stock Market Performance: Bitcoin maintains correlation with tech stocks (especially Nasdaq). Strong stock markets may lift Bitcoin; weak markets may drag it down.
Gold Prices: As another “store of value” asset, gold prices can provide insights into safe-haven demand and inflation expectations.
Industry Developments
Institutional Adoption News: Announcements of major companies, funds, or nations adopting Bitcoin can serve as significant catalysts.
Regulatory Progress: Monitor regulatory proposals, court rulings, and policy statements in major jurisdictions.
Technical Milestones: Major protocol upgrades, Layer 2 developments, or emerging new use cases may impact long-term prospects.
Competitive Landscape: Monitor developments of other cryptocurrencies (especially Ethereum) as capital may flow between different assets.
Expert Views and Market Commentary
Crypto industry analysts have differing interpretations of current declining bitcoin active addresses:
Bearish Views
Some analysts believe 660,000 active addresses reflect genuine retail interest contractions, and the market may need more time to reignite growth. They point to:
- Lack of new narratives to attract new users
- Persistent macro headwinds suppressing risk appetite
- Intensifying competition (from Ethereum, Solana, etc.) diverting attention
- Historically, periods with such low activity may last months or even years
These views suggest investors exercise caution, awaiting clearer reversal signals before increasing allocation.
Bullish Views
Other experts view low activity as a healthy market maturation sign:
- Weak hands have exited, leaving steadfast long-term holders
- Low activity provides opportunities to accumulate during low sentiment
- Institutional investment growth may not fully reflect in on-chain addresses (due to custody solutions)
- Layer 2 growth like Lightning Network means on-chain activity no longer fully represents total usage
These optimists believe current is ideal period for dollar-cost averaging and position building, preparing for the next cycle.
Neutral Views
Pragmatic analysts emphasize the need for multiple data points:
- Single metrics cannot determine investment decisions
- The market is in transition; new metrics may be more relevant
- Time horizons matter—short-term fluctuations shouldn’t alter long-term thesis
- Risk management and appropriate asset allocation matter more than trying to time the market
These views suggest developing strategies based on personal risk tolerance and investment goals rather than overreacting to short-term data.
Conclusion
Bitcoin active addresses falling to a 12-month low of 660,000, alongside miner revenue declining from $50 million to $40 million, undoubtedly reflects current market challenges. These on-chain indicators show reduced network activity, cooling investor interest, and post-halving economic pressure on the mining industry.
However, placing this data in broader context is crucial. Bitcoin experiencing cyclical booms and busts is normal, with each trough laying groundwork for the next growth phase. History shows that at times of lowest activity and sentiment, often the best long-term investment opportunities are being seeded.
Current on-chain data decline may reflect several situations: healthy market consolidation, bottom formation after weak hands exit, technical shift toward Layer 2 solutions, or rational response to macroeconomic uncertainty. Importantly, Bitcoin’s fundamental value proposition—decentralization, limited supply, censorship resistance, and store of value—remains unchanged.
For investors, the key is maintaining rationality, basing decisions on comprehensive analysis rather than single metrics, managing risk, and developing long-term strategies based on individual circumstances. For believers in Bitcoin’s long-term prospects,the current may provide opportunities to accumulate at relatively undervalued levels. For skeptics, continued observation awaiting clearer trend confirmation is appropriate.
Regardless of market evolution, bitcoin active addresses will remain one important indicator for monitoring network health and market sentiment, worthy of continued attention from all market participants.
Disclaimer: This article is reposted content and reflects the opinions of the original author. This content is for educational and reference purposes only and does not constitute any investment advice. Digital asset investments carry high risk. Please evaluate carefully and assume full responsibility for your own decisions.
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