With the bitcoin bull market back in 2021 had come a lot of what is referred to as ‘bitcoin tourists’. These are investors who are moved by the gains being made in the market and begin to FOMO (fear of missing out) on the digital asset as the price grew. Now that the bear market has arrived, a number of things have been happening. One of those is the exit of these bitcoin tourists out of the market as losses continue to rock the space.
Activity on the bitcoin network has been on the decline after an initial uptick that was triggered by the market crash. What has followed though is a reduction in the number of active addresses on the network following the ‘bank run’ as users scrambled to sell to avoid more losses. Incidentally, most of the decline in active addresses has been recorded when the network activity has been returning to normal.
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What this indicates is that the so-called ‘paper hands’ are beginning to exit the market. A report from Glassnode highlights that the number of bitcoin active addresses on a 7-day moving average is down 13% from its 1 million per day back in November to 870,000 addresses per day at the beginning of July.
The number of active addresses had peaked back in 2020 but had maintained a reasonable level through 2021 into 2022. As such, the activity on the network is now very low.
Active addresses decline 13% | Source: Glassnode
Now, in times of low activity, it shows that ‘bitcoin tourists’ have exited the market and at this point, those who remain are those with higher levels of convictions in the market. This has pushed the network towards a point where all speculative activity in the market is purged and proper balance is restored.
It remains a hard task to tell where the price of bitcoin will end up in the short term, especially for the rest of the year. The purging of speculative investors and market tourists is an extremely good thing but that does not mean that the digital asset is primed to recover soon.
BTC struggles to hold $20,000 | Source: BTCUSD on TradingView.com
For example, even though bitcoin had been able to recover above $20,000 in the past day, it continues to struggle to hold this point and fight off the bears at the $20,500 resistance level. Its slight recovery has not seen it beat any significant technical levels either since it is still trading well below its 50-day moving average.
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The only thing that can be expected from the market due to the purge is stability in sentiment. As such, the volatility may reduce to a certain extent as speculation wanes. However, there is no clear indication that bitcoin will be recording another bull rally anytime soon.
Featured image from Changelly, charts from Glassnode and TradingView.com
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