According to Cointelegraph, the number of active $Bitcoin (BTC.CC)$ addresses, representing the total number of active users on the network, has significantly decreased since the beginning of 2024. This rapid decline in a key indicator typically occurs only after the Bitcoin price has peaked, suggesting a potential market trend. Historical data shows that after the Bitcoin price reached its peak during the bull market cycles in 2017 and 2021, the number of active Bitcoin addresses also rapidly declined.

In a research report dated September 3, CryptoQuant contributor Avocado onchain stated that the price of Bitcoin has not followed the typical downward pattern seen in previous cycles. Instead, its price has been "consolidating within a larger range, without a clear direction."

The decline in active addresses may be partly due to institutional holdings. Swyftx Chief Analyst Pav Hundal stated:

As more market share is being occupied by institutional cash, these entities tend not to keep their money in hot wallets.

Avocado's explanation for this is:

This indicates a change in the mindset of holders, with more people opting for long-term holding. The sharp decline in wallet activity suggests that individuals have stopped trading and have essentially 'locked' their wallets.

Bitcoin futures trading

On the other hand, the trading volume of paper BTC (BTC futures and derivatives) is decreasing, which may indicate a shift in market participants' attitudes towards future price trends of Bitcoin. Investors may expect the price volatility to decrease, or they may expect the market to enter a consolidation period.

Capital is flowing towards the Bitcoin spot market as investors shift from futures contracts and derivatives to directly holding Bitcoin. This shift may suggest a preference for direct ownership over indirect investment through financial contracts, reflecting an increased focus on the long-term value of Bitcoin.

Long-term holders

According to data from Bitcoin Magazine Pro, the supply of long-term holders is increasing, indicating strengthened holding confidence. Historically, long-term holders have demonstrated strong resilience during periods of Bitcoin price volatility. Regarding supply, market sentiment has shifted from bearish to neutral, thereby reducing selling pressure.

The chart below displays the amounts of assets held by BTC short-term and long-term holders. Short-term holders are exiting, while the proportion held by long-term holders is increasing.

Over the past month, the market's Fear and Greed Index has indicated fear for as many as 23 days. The recent decline in BTC prices has led many short-term investors to exit hurriedly. This indirectly shows that the current market is dominated by emotion, and with low liquidity and turnover rates, many investors are choosing to adopt a wait-and-see approach or to quickly withdraw at the slightest sign of a price decline. The sharp drop in cryptocurrency prices, driven by Tuesday’s ISM Manufacturing PMI, confirms this. Market sentiment is sensitive and on edge.

Considering the phenomena described earlier, the market appears to be enduring a painful bottoming process, shifting towards long-term holding, and rebuilding confidence.