As the price of Bitcoin rises, its relationship with the number of active addresses continues to fall. This suggests that the number of people who actually use Bitcoin seems to have less and less influence on the perception of the value of cryptocurrency by investors.
The number of active Bitcoin addresses itself is growing – it is even close to a record level. However, according to Pearson’s correlation analysis, which was carried out by LongHash experts using data from the Quandl platform, something new has appeared in connection with the different indicators of the main cryptocurrency.
Recall that correlation usually means statistical dependence, or, more simply, the relationship of two or more indicators with each other. Correlation can be positive, negative, or zero. With a positive connection, the rates of the two cryptocurrencies will move up or down synchronously. If the relationship is zero, then it is impossible to detect any dependence in the behavior of indicators.
Finally, if the correlation is negative, then an increase in one indicator is associated with a decrease in the second – and vice versa. An example of such a relationship would be the prices of altcoins. They, as we have already found out, regularly fall with a large increase in Bitcoin.
Correlation studies in the world of cryptocurrencies reveal new trends and distinctive features of investor behavior. The last analysis was just like that.
How has Bitcoin changed?
The price of Bitcoin and the number of its active addresses have historically been closely related. If you look at the entire history of cryptocurrency from January 2009 to January 2021, you will notice that the cost and daily number of active addresses have an average correlation coefficient of 0.77. This figure indicates a «very strong» positive correlation. In other words, as the number of active Bitcoin addresses increased or decreased, its price tended to do the same.
In 2020, the correlation indicator dropped to 0.55, and in the period from August 1 to January 4, it fell to 0.28. That is, during 2020, the price of Bitcoin became more and more independent of the number of active addresses. Accordingly, the number of people who actually use cryptocurrency no longer accurately reflects its real value.
The importance of the number of active users of a cryptocurrency in the context of its value is obvious. Yet the more people use the coin, the higher its value in the eyes of society. It was like this before, but now the trend is changing.
Note that the history of cryptocurrency is very short in comparison with traditional assets, so it’s too early to draw one hundred percent conclusions. Could a new trend become a feature of the current bull run, that is, the stage of market growth? This is also a controversial issue, because in the period from August 1, 2017 to January 4, 2018, the correlation level reached 0.82, that is, it corresponded to the norm at the peak of the market, and we are still far from it. Overall, this is truly a new trend in the world of cryptocurrencies – and it may indicate global changes in the industry.
What is its essence? LongHash experts attribute the drop in correlation to several factors. The first is a sharp influx of large investors in 2020, who began to invest huge amounts in Bitcoin. These include investment companies with clients who want to profit from the rise in the price of BTC. Such a company can purchase bitcoins for 10 thousand investors, but for this it does not have to create 10 thousand new crypto wallets. That is, there is no relationship between the amount of investment and activity in the blockchain.
The second factor is the desire of many crypto enthusiasts to keep BTC for a long time. To do this, coins are transferred to cold wallets, which also reduces the indicators of activity on the network. The conclusion is simple: Bitcoin is gradually acquiring the properties of gold in the eyes of many investors, both large and amateurs. That is why the ratio of price and number of active addresses is falling rapidly.
It seems to us that too little time has passed for the full-fledged formation of a new trend in the world of cryptocurrency, but the makings for this already exist. The value of Bitcoin really depends less and less on the number of active users, although it has been growing very actively – until today’s nightly fall of the market. Accordingly, although the cryptocurrency is not used so actively, its value in the eyes of ordinary people is still increasing.
We believe that the main reason for this is the activity of large investor companies who buy bitcoins in incredible volumes. Accordingly, they seriously reduce the number of free coins in circulation, which in fact creates a BTC shortage on a tiny scale. In addition, a huge number of coins end up in a limited number of hands, which is why the number of active users cannot grow as actively as the course does.
