While the Ethereum price is still struggling to build sustained bullish momentum, an investigation into its on-chain activity has revealed a significant change in the behavior of its market participants.
Active addresses fell from 483,000 in August to 327,000
In a Quicktake post on the CryptoQuant platform, market analyst CryptoOnchain says shared that there is a growing scarcity of activity within the Ethereum network. In particular, the quantitative reference data obtained from the Ethereum Active Addresses metric, observed on the 7-day Simple Moving Average.
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Since reaching its peak in August, the value for active addresses has steadily declined from around 483,000 to 327,000 – a level that is the lowest since May this year. This drop of over 32% indicates an increasing exit of willing participants from the Ethereum network.
Interestingly, the aforementioned recession is not an isolated event. Right around the same period when active addresses were exploring the south side of the charts, Ethereum price also took a bearish direction. During this period, the Ether token lost its valuation of $4,800 and started to decline to its current price around $3,100.
According to the analyst, this strong correlation between Ethereum’s declining valuation and declining network usage points to something clear: that the recent price drop is likely a result of reduced demand for networks. This further shows that market participants are moving beyond speculation and instead adopting a broader view of the Ethereum blockchain.
Ethereum market Outlook
On the more positive side, CryptoOnchain explained how healthy bull cycles differ from the current market cycle. Rising prices are not usually taken for granted as they often indicate a healthy bullish cycle.
An expansion of the cryptocurrency’s network usage also lends credence—enough to serve as confirmation—to suspicions of structural shifts toward bullish phases. This theory applies to a variety of historical events.
Thus, a market would not qualify as bullish enough if the Ethereum price were to rise without any parallel growth in on-chain activity. Therefore, to achieve a compelling price reversal, there must be a significant and sustainable recovery of active addresses.
This would signal the return of demand in the chain and further increase expectations of impending momentum. Until these conditions are met simultaneously, the Ethereum market will remain in a state of extreme caution, where prices can go either way, with the influx of network users being the most important factor.
At the time of writing, the Ether token is valued at around $3,106, reflecting no significant movement since the past day.
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Featured image from iStock, chart from TradingView