Is Bitcoin losing its momentum?

Posted: September 6, 2023

• Bitcoin showed reduced wallet growth and declining mean transaction sizes.
• Traders have turned bearish, and implied volatility has decreased, suggesting a period of caution in the market.

Bitcoin [BTC] continued testing the patience of its holders, as it meandered around the $25k-mark at the time of writing. Moreover, recent data suggested a slowdown, adding to the king coin’s descending momentum.

Read Bitcoin’s [BTC] Price Prediction 2023-2024

Stepping on the brakes

One significant indicator of this slowdown was the overall relative change in Bitcoin wallets over a 30-day period. Although wallets were still expanding, their growth rate had decreased, particularly among those holding 10 – 10,000 Bitcoins.

These larger cohorts tend to have a more pronounced effect on market dynamics.

Thus, Bitcoin’s declining momentum could impact its performance and investor sentiment. Slower growth may discourage new investors and speculators, potentially leading to stagnation or a drop in the coin’s price.

Source: Santiment

Another concerning sign was the mean transaction size of transactions. As per Glassnode, Bitcoin’s mean transaction size, when averaged over seven days, reached a one-month low of 518.646.

This drop in mean transaction size usually means reduced activity or a shift in the type of network transactions.

#Bitcoin $BTC Mean Transaction Size (7d MA) just reached a 1-month low of 518.646

Previous 1-month low of 518.770 was observed on 21 August 2023

View metric:https://t.co/PJ0bkLTuVs pic.twitter.com/iOHcHxSJqN

— glassnode alerts (@glassnodealerts) September 5, 2023

Bitcoin also faced challenges in the NFT sector. Notably, activity across all major exchanges related to Ordinals declined, reflecting a broader trend of waning enthusiasm.

Source: Dune Analytics

How are traders doing?

Traders have turned bearish on Bitcoin, as indicated by the rising put-to-call ratio. This ratio grew from 0.42 to 0.47 in recent weeks.

A higher put-to-call ratio suggested that more traders were betting on a decline in Bitcoin’s price rather than its rise, reflecting a shift in market sentiment towards caution.

Source: The Block

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Additionally, the implied volatility for Bitcoin also fell over the past few months. Implied volatility measures the market’s expectations for future price fluctuations. A decrease in implied volatility suggests that traders anticipate a period of price stability or predictability.

While this can be seen as a positive sign for some investors, it may also indicate a lack of speculative interest, potentially contributing to Bitcoin’s unassuming price range.

Source: The Block