Bitcoin is still waiting for retail investors – on-chain analysis

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The decline in new addresses and the decline in the number of profitable holders are strong signals that the market is far from the FOMO usually seen at the end of a bull market. At the same time, both indicators are showing bullish divergence, indicating that the upward trend may resume soon.

The volume of searches for the term “bitcoin” has decreased

One of the easiest ways to measure the hype around the cryptocurrency market is to look at Google Trends. Search volume shows how often users searched for “bitcoin” in a given period in a particular region. In the previous cycle, the bull market ended when the search volume for bitcoin reached 100. That was in December 2017.

During the current bull market, Google Trends peaked in May 2021 at 79 (green circle). Since the beginning of July, the indicator has returned to the range of 24-36, and this week it was noted at the level of 26.

Retail investors are biding their time

Google Trends is not one of the on-chain indicators, but it confirms the big picture. New addresses are the number of unique addresses that made a Bitcoin transaction for the first time. The indicator illustrates the dynamics of network growth and the flow of new users.

In the five-year chart, we see that new addresses peaked at the end of the bull market in December 2017 (green arrow). The sharp correction was followed by a long and slow consolidation, which also had its peaks and lows.

The last peak was reached in early January 2021 (blue arrow) after Bitcoin completed its growth phase from $ 10,000 to $ 42,000. At that time, this level was an all-time high. Since then, the price has renewed records, but there is a correction in the new addresses chart (red arrow).

Cryptocurrency market analyst @OnChainCollege found an interesting pattern on this chart. He compared fractals of new addresses in 201 and 2021. The graph shows that the number of new addresses is less than during the cyclic peak.

He then divided the two charts into ascending and descending sequences. Their similarity suggests that a large influx of new users in this cycle is yet to come. Here’s how he commented:

“We know. Retail investors haven’t come yet. Nothing new”.

However, another cryptanalyst @woonomic posted a different graph. His findings contradict the previously voiced theory of the passive role of private investors.

Here’s what he thinks:

“The last time retail traders were buying back bitcoin en masse was at the lows following the COVID collapse.”

Fewer addresses in profit

Another on-chain indicator that indicates that the retail market has not reached the FOMO stage is the percentage of holders in profits. The indicator takes into account all accounts where coins were bought on average at a price lower than the current one.

Compared to the all-time high of $ 69,000, it fell by 25%. The scale of the fall is comparable to the May collapse.

The percentage of holders in profit reached at the end of the bitcoin summer correction (dotted line).

The only difference is in the cost of bitcoin: in July it was sold at $ 29,000. Nevertheless, now, at a price of $ 46,000 – $ 49,000, the percentage of losses is the same.

This discrepancy was highlighted by analyst @Parabolic_Matt, who compared it to a similar situation in 2020-2021. The bitcoin rate is growing, and the number of addresses in profit is falling (yellow lines). When this bullish divergence has occurred in the past, BTC has shown dynamic gains.

Another interpretation of this discrepancy is that retail buyers are gradually entering the market. New addresses are bought at their peak, but then capitulated and sold at a loss. This leads to another opportunity for the accumulation of so-called “smart money” and the beginning of a new wave of growth, when cheap BTC sells for more than the next wave of new market entrants.

The moment the growth of new addresses turns parabolic and the vast majority are in profit is likely to indicate a peak in the current bull market. On-chain analysis says the time has not come yet.

Here you can read the latest technical analysis for Bitcoin (BTC).

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