Bitcoin Recovery Gains Momentum While Network Activity Remains Muted – Risk Ahead?

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After tumbling to nearly $74,500 on June 6, Bitcoin (BTC) has staged an impressive recovery, currently trading in the mid-$100,000 range – just about 5% below its all-time high (ATH). While optimism has grown following the rebound, dwindling Bitcoin network activity is raising concerns.

Bitcoin Price Recovers But Network Activity Vanishes

According to a recent CryptoQuant Quicktake post by contributor CryptoMe, Bitcoin network activity has remained subdued despite the digital asset’s impressive price recovery. The analyst highlighted several data points that confirm the lack of interest in the Bitcoin blockchain.

First, the analyst pointed to the decline in BTC active addresses. When BTC fell from around $110,000 to $75,000, the number of active addresses dropped sharply. Yet, even as BTC prices have rebounded, the number of active addresses has failed to recover.

Similarly, the Bitcoin Network Activity Index – a composite measure that includes transaction counts, total unspent transaction output (UTXO), and bytes per block – continues to signal low engagement across the network.

Another area of concern is Bitcoin’s mempool. For the uninitiated, the BTC mempool is a temporary holding area where unconfirmed transactions wait to be validated and added to the blockchain by miners. The analyst noted:

Looking at the current data, the mempool is nearly empty – there are very few pending transactions. Sometimes, the mempool can be low because of technologies like SegWit or batching. But when we also see a drop in active addresses and low network activity, it clearly shows that the reason is a lack of interest.

CryptoMe concluded that the low on-chain activity is “not a good sign,” especially as it suggests fading interest from retail investors. However, the analyst added that improving global economic conditions and looser monetary policy could help bring retail participants back into the market.

Will Retail Investors Make A Comeback?

Beyond network metrics, other indicators also suggest muted retail participation in the current BTC rally. For example, exchange activity has dropped to multi-year lows, further reinforcing the idea that retail engagement remains limited.

The overall demand for BTC remains significantly weak – casting serious doubts on the sustainability of the current bullish momentum. That said, some encouraging signs still remain.

The Bitcoin bubble chart indicates that, although BTC is trading near its ATH, it has yet to show signs of overheating – suggesting there’s still room for further price growth. At press time, BTC trades at $107,225, up 0.1% in the past 24 hours.

Featured Image from Unsplash.com, charts from CryptoQuant and TradingView.com

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