On-Chain Analysis: Declining Hashrate Does Not Slow Bitcoin’s Growth

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In Brief
  • BTC Hashrate and active addresses have been declining since all-time highs at $64,800.

  • However, the network is still seeing user growth.

  • Accumulation in hodler positions and a decline in BTC liquidity could signal a reversal of the downward trend.

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Today’s on-chain analysis highlights the declining hashrate of the Bitcoin network, which correlates with the bearish trend of the BTC price. However, it turns out that there are still more new users taking advantage of the bottom to join the crypto market.

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At the same time, indicators of changing positions of long-term hodlers and declining BTC liquid supply provide signals of a potential trend reversal. Still, the correlation between the dropping price of BTC in the last two months and the short-term speculators sell-off remains very apparent.

Drop in hashrate and addresses

Since the all-time high of $64,800 on 14 April, the hashrate of the Bitcoin network has experienced a steady decline. The current value has reached levels not seen since May 2020 (green circle), when the BTC price was $9,000.

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Mean Hashrate BTC / Source: Glassnode

The drop in hashrate is therefore correlated with the drop in the BTC price. One of the reasons is also FUD related to the regulation of Bitcoin mining in China and the mine shutdowns there.

We see similar behavior in the on-chain indicator, which illustrates the number of active BTC addresses. Here too, the network sees a decline from all-time high to levels not seen since March 2020 (green circle). Back then, Bitcoin was recovering quickly from the COVID-19 crisis and the bottom at $3782.

Number of Active Addresses BTC / Source: Glassnode

Despite this, Willy Woo tweeted a chart of the 7-day moving average of Entities Net Growth, which gives a slightly different picture. According to this on-chain analyst, net user growth is “as strong as ever”.

Indeed, the chart shows that after the double bottom in May and June, the last few days have seen a revival in user growth, who seem to be joining the market and taking advantage of the discounted BTC price.

Bitcoin Entities Net Growth (7d moving average) / Source: Twitter

Hodlers increase positions and BTC loses liquidity again

Another on-chain analyst, Yann & Jan, has published updated charts of the positions of long-term hodlers (LTH) and the change of BTC liquid supply. They provide additional arguments that the current price action could potentially serve as a reversal of the downtrend and a continuation of a long-term bull market in the future.

First of all, the chart of the positions of long-term hodlers unambiguously indicates a progressive phase of BTC accumulation and buying, which increases inversely proportional to the Bitcoin price. Such a strong increase in positions by LTH was not seen for over a year.

Bitcoin Long-Term Holder Net Position Change / Source: Twitter

Then, for the first time since the May lows, the chart of BTC liquid supply change (Liquid Supply Change) entered negative territory. This means that once again the amount of Bitcoin available for trading is starting to outstrip demand and could potentially lead to higher prices.

Bitcoin Liquid Supply Change / Source: Twitter

Finally, the latest chart confirms the trend that BeInCrypto wrote about in an analysis a few days ago. The group of investors that has realized the most losses during the drops are the short term speculators in the bright red area (yellow circle).

This group was also recently joined by some long term hodlers (light blue area), who sold with a loss in around $30,000. However, this is a small portion, as most LTHs are still in the profit.

Long- and Short-Term Holder Supply in Profit/Loss / Source: Twitter

For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
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PhD and an assistant professor at an international university in Lublin, Poland. Spent 10 years studying philosophy of nature and sport science. An author of 4 books and two dozens of scientific articles. Now, he is using his mind for the benefits of the cryptocommunity. Technical analysis enthusiast, Bitcoin warrior, and a strong supporter of the idea of decentralization. Duc in altum!

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