Avocado_onchain2025-02-23

Bitcoin Network Activity Declines as Investor Sentiment Weakens

The number of active wallets and transactions used for Bitcoin deposits and withdrawals is on a downward trend. Additionally, the accumulation rate of Bitcoin spot ETFs has slowed, with recent minor capital outflows observed. The number of UTXOs is also decreasing, with the magnitude of the decline similar to the correction period in September 2023. 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. The key concern here is that overall investor sentiment has significantly weakened. Bitcoin‘s rally was driven by optimism surrounding Trump’s election victory and expectations of strategic asset allocation in the U.S., but concrete executive orders or legislative actions have yet to materialize. Additionally, geopolitical tensions, particularly related to trade policies, have contributed to risk-off behavior in the market. Since previous bullish narratives have already been priced in, further upside momentum will require either the resolution of uncertainties or new bullish catalysts. Given the current conditions, short-term price movements based on past charts and on-chain data are difficult to predict. If market conditions improve and Bitcoin resumes its upward trajectory, investor confidence is likely to recover. However, if uncertainty persists, we must consider the possibility of another prolonged consolidation phase, similar to what began in March 2024.