While Ethereum’s price is still struggling to maintain its bullish momentum, an examination of its on-chain activity reveals significant changes in the behavior of market participants.
Active addresses fell to 327,000 from August high of 483,000
In a Quicktake post about the CryptoQuant platform, market analyst CryptoOnchain shared that there is a growing lack of activity within the Ethereum network. Specifically, quantitative reference data taken from Ethereum active address metrics observed on a 7-day simple moving average.
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Since peaking in August, the active address metric has steadily declined from about 483,000 to 327,000, the lowest level since May of this year. This decline of more than 32% suggests an increasing exodus of willing participants from the Ethereum network.
Interestingly, the aforementioned economic downturn is not an isolated phenomenon. Around the same time that active addresses explored the south side of the chart, Ethereum price also turned bearish. During this period, the Ether token lost $4,800 in valuation and its current price began to fall to around $3,100.
According to the analyst, this strong correlation between Ethereum’s declining valuation and shrinking network usage clearly indicates that the recent price decline is likely the result of reduced network demand. This further indicates that market participants are moving beyond speculation and adopting a broader outlook on the Ethereum blockchain.
ethereum market outlook
On the more positive side, CryptoOnchain explained how a healthy bullish cycle differs from the current market cycle. Rising prices usually cannot be taken for granted as they often indicate a healthy bullish cycle.
The expanding use of virtual currency networks also lends sufficient credibility to the suspicion of a structural change to a bullish phase. This theory holds true from various historical events.
Therefore, if Ethereum price is rising without a parallel growth in on-chain activity, the market is not bullish enough. Therefore, a significant and sustained recovery in active addresses is required for a convincing price reversal to be sustained.
This signals a recovery in on-chain demand and further increases expectations for impending momentum. Until these conditions are met simultaneously, the Ethereum market will remain on maximum alert, with the main factor being the influx of network users, which could send the price in either direction.
At the time of writing, the value of the Ether token is approximately $3,106, which does not reflect any significant movement since the previous day.
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Featured images from iStock, charts from TradingView
