Bitcoin’s recent price action has been a roller coaster ride of highs and lows. However, while Bitcoin has hit an all-time high and enjoyed a near-constant positive trajectory for two years, we have yet to see a steady influx of retail investors. The potential for increased retail participation and the potential to push Bitcoin’s price to unprecedented heights are prospects that many investors are eagerly anticipating. In this article, we explore when we might see these retail investors return to the Bitcoin pool and whether their return could actually propel Bitcoin to even greater heights.
Active Title Growth and Impact
To anticipate this potential retail wave, it is important to scrutinize Active Titles Growth TrendData from Bitcoin Magazine Pro indicates a decline in the number of active participants in the network in recent months. The 365-day moving average (blue line), in addition to 60 days (purple line) and 30-day averages (Red line), tells the story of a decline in network activity. This decline brings the number of active users back to levels reminiscent of early 2019, after the Bitcoin bear cycle, when prices were between $3,500 and $4,000.
This decline in the number of active network users raises doubts about Bitcoin’s potential to rise in the current cycle. Interestingly, while Bitcoin hit a new record high of around $74,000, there was no similar increase in the number of network users, a stark departure from previous cycles.
The necessary influx of new capital
This trend may be a reflection of Bitcoin’s evolving identity. Originally a peer-to-peer digital currency, Bitcoin is increasingly seen as a store of value. As a result, fewer people are using it for day-to-day transactions, and instead investing capital in Bitcoin as a long-term asset.
Bitcoin HODL Waves and HODL max achieved Waves highlight this shift. These metrics group Bitcoin network users based on how long they have held their coins, as well as showing their impact on the Bitcoin price. Recent data reveals that around 20% of Bitcoin has been held for three months or less, suggesting that new users are entering the market, but as we can see from the average active addresses in the data above, they are not using Bitcoin as frequently as they once did.
The impact of these new users on the maximum achieved (Average accumulation price of all BTC) is significant, with more than 40% of the recent impact coming from users who have held Bitcoin for three months or less.As shown in the warm red/orange colors in the chart below.This indicates that users are entering the market at higher prices and are behaving in a manner consistent with previous cycles (We have recently seen initial early upside cycle flows at levels similar to previous cycles, as indicated by the red box.), but not as much as we saw before.
Understanding Market Forces and Retail Participation
A look at previous Bitcoin cycles shows that a spike in retail activity often precedes a market peak. For example, during the 2017 and 2021 bull runs, retail interest spiked about 6 months before the price peak. The lack of a significant spike in retail interest currently, as evidenced by Google Trends, suggests that we are seeing a more moderate and sustainable market growth.
Another major consideration is Open interest in bitcoin Chart measuring the total value of open Bitcoin futures contracts. Since late 2022, this metric has not shown a significant increase; in fact, we have seen a steady decline since the lows of the bearish cycle (As shown by the decreasing red line in the graph below,). This reveals that investors now prefer to trade actual Bitcoin rather than simply engage in derivatives trading. This indicates a shift in the narrative where investors are more interested in holding Bitcoin for the long term rather than chasing short-term speculative gains.
Conclusion
Given current trends, the absence of retail selling frenzy can be seen as a positive sign for the market’s long-term prospects. As Bitcoin approaches new highs, keeping a close eye on retail investor arrivals will be essential. If retail investors start entering the market in large numbers, will they revert to their old habits of buying for fear of missing out, or will they continue to prefer holding for the long term?
In short, despite the decline in Bitcoin active user metrics, the market is showing signs of stability and long-term investment. The lack of immediate interest from retail traders may seem bearish, but it is likely bullish as it points to a more moderate and sustainable growth path.
For a more in-depth look at this topic, check out our recent YouTube video here: