Bitcoin holds first place as the largest cryptocurrency and shows a major decrease in wallet use along data from Santiment. In the past three weeks, this number of nonempty wallets has declined by 277,240 over Bitcoin.
The growth of this network, however, is in stark contrast from that of the XRP and Ethereum networks, which still have more users continuing to join. Chris Kuiper, director of research at Fidelity’s crypto division, attributes the decline in Bitcoin’s on-chain activity to the increasing role of Bitcoin exchange-traded funds (ETFs).
Bitcoin Wallets Decline Amid Changing Market Trends
Elaborating, Kuiper adds that the presence of ETFs eliminates the need for performing direct transactions on the blockchain. This means that Bitcoin’s mempool stays relatively empty, indicating that there is less transactional demand on the network.
While on-chain activity dipped, Fidelity does not perceive this as a sign that Bitcoin’s health is being impaired. According to the firm, off-chain settlements can help in improving the market efficiency and offblock congestion and transaction fees of the blockchain.
According to them, the drop in Bitcoin wallets coincides with investors outside of large corporations leaving the market. Such declines in retail participation have historically preceded long term price surges as larger investors collectively referred to as whales and sharks accumulate Bitcoin from weak hands. You will see this pattern repeated in previous market cycles where this causes price stability then growth.
It is now being traded at $96,008 on CoinGecko. Despite underwhelming U.S. inflation data, the cryptocurrency has been unable to surpass the $100,000 psychological barrier as its price continues to move. Furthermore Bitcoin ETFs have underperformed; logging $251 million outflows on Wednesday on their own.
Despite its uncertain short term outlook, history would rebuke that prolonged lull in retail enthusiasm and growing whaling accumulation would result in a price surge. Also, XRP and Ethereum are expanding their own blockchain networks indicating that people continue to be interested in other blockchain platforms.
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