In 2024, the crypto market has seen a declining trend of active addresses in the BTC and ETH markets. Data provided by CryptoQuant and highlighted by the crypto analyst Burak Kesmeci show that the number of active Bitcoin and Ethereum addresses has been steadily declining; this phenomenon may have a profound impact on the further development of the market.
Since early 2024, active Bitcoin and Ethereum addresses have been declining“For the bulls to dominate the market, the influx of new investors is a crucial condition.1. Bitcoin 1.17M -> 855K2. Ethereum 382K -> 312K” – By @burak_kesmeciFull post https://t.co/gZftQidnxa pic.twitter.com/q5cdpv7x6t
— CryptoQuant.com (@cryptoquant_com) October 1, 2024
Bitcoin & Ethereum Numbers: A Sharp Decline in Activity
The active address for Bitcoin has fallen from 1.17M at the beginning of 2024 to 855K, a 27% loss. The number of active addresses on Ethereum has also decreased from 382K to 312K, a decrease of 18%. This reduced participation is alarming for bullish investors, particularly when new participants boost the market and price appreciation.
As Burak Kesmeci points out, although investors show more interest in spot ETFs, this has not been accompanied by increasing numbers of new entrants, which means that existing investors are simply recycling liquidity without bringing fresh investors into the markets.
Lack of “Hype” and Market Reaction
The approval of spot ETFs is anticipated to attract more active addresses, but the so-called ‘hype’ has not followed. The decrease in address activity may be signalling that retail investors, who drive market booms, are yet to make their entry into the crypto sphere.
Some of these sources of stagnation are also attributed to external macroeconomic factors. As Kesmeci underlines, the Federal Reserve’s ongoing Quantitative Tightening (QT) measures that started years ago and continue to remove liquidity from the financial system are the primary reasons for stagnation. Since liquidity is expected to remain tight, the expected increase in activity after the Fed’s first cut has not occurred.
The Role of the Fed’s Policy
According to Kesmeci, though there are some rises in the M2 money supply, they have not been adequate to counterbalance the QT measures by the Fed. For this reason, crypto markets have not received the amount of new capital as many expected. But there is a growing hope that things will improve in the future. The analyst critiques that the moment when the Fed returns to QE (quantitative easing), the crypto market could expect a similar turn in activity and price increase.
Wrap Up
Without new retail investors, the bullish potential of the market might continue to be weak even with the inflow of institutional investors. Nevertheless, there are expectations of changes in the monetary policy that could give new life to the crypto market later in the year. The market is now just waiting for a more favorable macroeconomic environment for there to be renewed interest and growth.
