Measuring the spread of the Bitcoin network is not that easy. Because the picture that provides the number of addresses is distorted. But a new on-chain indicator can shed light on the darkness of adaptation and even anticipate a price trend.
The Bitcoin price is getting strong again and was able to rise over 8 percent within a week. It is now well over $ 11,000. Separated from this, however, a more long-term indicator could also help with Bitcoin price prediction.
The Bitcoin course grows with the adaptation. Logical, after all, around 900 BTC worth $ 9.5 million (USD) flows into the network every day. This volume must first find buyers in order for the price to remain stable at all — not to mention growth.
How widespread Bitcoin is, however, is difficult to measure. The number of addresses, i.e. the individual “bank accounts” on which BTC is located, only gives an imprecise picture. After all, it is now common practice to generate a new address for every transaction. That is, individual Bitcoiners can have two to three-digit amounts of different addresses. Furthermore, individual addresses can also hold the credit of different Bitcoiners, such as Exchange addresses.
The on-chain analysis service Glassnode paints a more precise picture. With the “Active Entities Indicator,” the data scientists try to separate addresses and actual Bitcoin users. The result: the number of addresses is about three times higher than that of users. In other words: on average, each “entity” controls three addresses.
According to our analysis, the number of entities that own Bitcoin was around 23.1 million in January 2020,
Glassnode writes on Medium.
The growth of Bitcoin users is a clear bullish signal — and it could hardly be any brighter right now.
Because as on-chain analyst Cole Garner notes on Twitter, Bitcoin users are currently flocking to the network in droves.
In their search for meaningful on-chain indicators, investors can now fall back on another tool. We are talking about the “Active Address Sentiment” from BTC trader Philip Swift. This is a Bitcoin metric that compares the number of active addresses with the price. Lo and behold: there seems to be a connection. If the orange line (active addresses) touches one of the dotted lines, this often marks a short-term bottom or a short-term top.
The indicator becomes intuitively understandable if one imagines it as the relationship between price growth and adaptation. If the price soars, the price increase cannot be absorbed by the adaptation (measured here as active addresses), and it must be corrected. The indicator is therefore a combination of on-chain metrics and fundamental analysis and can provide important information about the short-term trend.
Disclaimer: These lines are not a substitute for investment advice, investments in the crypto market are made at your own risk. Invest only as much as you are willing to lose. I get commissions for purchases made through links in this post.”