Bitcoin's Network Activity Slump Threatens March 2024 Repeat

Bitcoin's Weakening Network Activity Signals a Repeat of March 2024 Consolidation, Analyst Says

Bitcoin, the leading cryptocurrency, has been trading within a narrow range since the beginning of February, struggling to break out of consolidation as both buying and selling pressures remain subdued. On-chain data suggests that this period of sideways movement could persist due to weakening activity on the Bitcoin network.

According to pseudonymous CryptoQuant analyst Avocado_onchain, Bitcoin network activity has been steadily declining, contributing to BTC's recent narrow price movements. If this trend continues, "we must consider the possibility of another prolonged consolidation phase, similar to what began in March 2024," the analyst says.

Avocado considers the number of daily active wallet addresses on the Bitcoin network as one such data point. When observed using a 30-day small moving average (SMA), the daily count of addresses that have completed at least one BTC transaction has plummeted by 2% since February 1, signaling reduced user demand and contributing to downward price pressure on the coin.

The number of Unspent Transaction Outputs (UTXOs) is also decreasing, with the magnitude of the decline similar to the correction period in September 2023. UTXOs track the amount of Bitcoin left after a transaction, which can be used as input for future transactions. When the number of UTXOs declines, fewer new coins are being distributed or moved, suggesting reduced transaction activity and a period of consolidation, where investors are holding rather than spending their coins.

If this trend continues, we could see signs of investor exodus similar to the market cycle peak of 2017. However, a simple decline in UTXOs alone is not enough to confirm the end of the current cycle, as other indicators still suggest a bullish outlook.

As of this writing, BTC trades near the support line of its horizontal channel at $95,527. If the Bitcoin network activity wanes, further affecting the demand for the king coin, its price could break below this level. In this scenario, BTC could drop to $92,325. On the other hand, if market trends shift and the buying pressure gains momentum, the coin could rally toward the resistance at $99,031 and attempt a crossover. If successful, BTC