Bitcoin [BTC] has shown signs of recovery in the past day as the market crossed the $70,000 mark, with sentiment pointing to new capital flowing into the market again.
However, the on-chain activity does not match the ongoing recovery and instead offers a different perspective on what is happening with the leading crypto asset.
Signals in the chain indicate weakness
Adjusted on-chain volume, which tracks Bitcoin’s cumulative buying and selling activity, indicates underlying weakness in the market.
At the time of writing, this volume has fallen to one of the lowest levels in its history, indicating weak on-chain Bitcoin usage.
A comparison between volume and price developments shows a clear connection. When volume increases or shows consistent usage with occasional spikes, Bitcoin’s price has historically gone up in strong rallies.
Source: Alpharactal
The opposite usually happens as the volume decreases. Still, Bitcoin has risen to the $70,000 range even as volume continues to weaken.
Nevertheless, crypto-on-chain analyst Joao Wedson believes the second quarter, starting in April, could impact Bitcoin volume activity.
“A significant increase in volatility is needed to reignite the crypto fire. And I believe this will happen from the second quarter of 2026.”
Use in the chain is decreasing
There has also been a decline in the use of the Bitcoin blockchain. At the time of writing, data is from Artemis showed that the number of daily active users dropped to 375,700 in the past day.
This decline marks one of the lowest levels recorded this year. A continued decline below the 343,000 user threshold would put network activity at its lowest point since April 2024.
Source: Artemis
A similar pattern is visible in transaction fees, which have fallen to around $127,000.
This trend is notable because declining users and falling rates confirm that the weakness reflected in volume remains.
Lower network activity also implies reduced demand for Bitcoin due to the circulating supply in the market.
Liquidity clusters indicate that downside risk remains
While on-chain activity provides useful insight into Bitcoin’s potential trajectory, it does not provide a complete picture.
Unlike Ethereumthat supports extensive decentralized financial activities, Bitcoin’s ecosystem works differently. This makes it necessary to investigate additional market indicators.
One of those indicators is volatility and liquidity positioning. For this reason, the liquidation heatmap was analyzed as it highlights the likely directional bias and areas of concentrated market volatility.
Source: CoinGlass
The heatmap suggests that the market has stronger liquidity incentives for Bitcoin to go lower than to go higher.
This observation is based on liquidity clusters, represented by shaded areas on the chart, which appear more concentrated below the current price.
On the other hand, these clusters extend into the $66,000 region.
On the upside, liquidity concentration appears weaker, extending only weakly towards the $72,000 level.
This structure suggests that while current momentum could still push Bitcoin higher, the downside pull remains present. As a result, Bitcoin could still face another short-term decline before a stronger trend emerges.
Final summary
- Bitcoin is rising despite declining usage, costs and volumes in the chain.
- Liquidity clusters show that the downside appeal for Bitcoin still exists and remains on the bears’ radar.