While the price of Ethereum still struggles to create sustained bullish momentum, an investigation into its on-chain activity has revealed a significant change in the behavior of its market participants.
Active addresses decline to 327,000 from a high of 483,000 in August
In a Quicktake article on the CryptoQuant platform, market analyst CryptoOnchain stated that there is an increasing scarcity of activity within the Ethereum network. Specifically, the referenced quantitative data obtained from the Ethereum Active Addresses metric, observed on the 7-day simple moving average.
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Since reaching its peak in August, the active addresses metric has declined steadily, from around 483,000 to 327,000 – a level that marks the lowest reached since May of this year. This slowdown of more than 32% suggests a growing exit of voluntary participants from the Ethereum network.
Interestingly, the aforementioned slowdown is not an isolated phenomenon. Around the same time that active addresses were exploring the south side of the charts, Ethereum price also took a bearish direction. This period saw the Ether token lose its valuation of $4,800 and begin its descent towards the current price around $3,100.
According to the analyst, this strong correlation between the decline in Ethereum’s valuation and its contractual use of the network indicates something clear: the recent price drop is likely the result of a reduction in demand from the network. This further shows that market participants are moving beyond speculation and are instead taking a broader view of the Ethereum blockchain.
Ethereum Market Outlook
On the more positive side, CryptoOnchain explained how healthy bull cycles differ from the current market cycle. Typically, rising prices are not taken for granted as they often indicate a healthy bull cycle.
An expansion in cryptocurrency network usage also lends credence – enough to serve as confirmation – to suspicions of structural shifts towards bullish phases. This theory is true from a variety of historical events.
Thus, a market would not be sufficiently optimistic if the price of Ethereum was rising without any parallel growth in on-chain activity. Therefore, for a convincing price reversal to occur, there must be a significant and sustained recovery in active addresses.
This would signal the return of on-chain demand and further bolster expectations of impending momentum. Until these conditions are simultaneously met, the Ethereum market remains in a state of greater caution, where prices could move in either direction, with the major factor being the influx of network users.
At press time, the Ether token is valued at around $3,106, reflecting no significant movement since the day before.
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Featured image from iStock, chart from TradingView
