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Bitcoin and cryptocurrency short-term traders and investors have started to leave the market, leaving long-term investors and HODLers who have been in the game for an extended period making up Bitcoin’s transactions.
According to on-chain analytics firm Glassnode, Bitcoin has seen an exodus of “speculative entities” and “market tourists” after eight months of declining values. As the cryptocurrency has fallen into a bear run, with values slashed and struggling to maintain any semblance of stable trading prices, those who entered the market briefly have faded away. This comes right off the back of one of Bitcoin’s worst months since it was launched. In June, Bitcoin took a knock of early 40% off its value over the thirty days. The bear market has rattled investors. According to Glassnode:
“The Bitcoin network is approaching a state where almost all speculative entities, and market tourists have been completely purged from the asset.”
Bitcoin’s shedding of “tourist” traders
According to Glassnode, looking at the on-chain activity on Bitcoin’s network indicates what those in the market are doing and who they are.
- High activity on Bitcoin’s network
A lot of trading activity on the network, with new demand from fresh investors in the market, increased speculation and high sentiment regarding the industry’s movements usually indicates the market is headed towards or is in a bull run.
- Low activity and reduced Bitcoin trading
On the other hand, reduced demand and fleeting investment from market tourists, with negative sentiment and higher volumes of criticism are typically indicative of a bear market. In this, we often see short- and medium-term traders sell off leaving the market with long-term holders.
Increased interest from small investors
Despite the massive exit of “tourists”, Glassnode data also pointed to an increase of Bitcoin “shrimps” – those holders in the market that have less than 1 Bitcoin token in their wallets. Large-scale investors (known as Bitcoin whales) have also been adding to their portfolio – with those 1,000 to 5,000 Bitcoin tokens in their addresses.
Looking at the recent shift from market “tourists”, the cryptocurrency market has seen a change in trade volumes. While shrimps and whales might be accumulating Bitcoin tokens, there has been a downtrend in active addresses over the past eight months. This means there are reduced trading volumes from both new and old investors in the market. According to Glassnode’s data, address activity last year in November (when Bitcoin saw its all-time high value) was sitting at over 1 million active addresses per day to 870,000 in the first week of July this year. This reduced trading volume and the strong fear levels in the market sentiment are obvious signs of the current bear market.
It’s not all doom and gloom in the cryptocurrency trading market, however. This is not the first bear market, and previous bear runs saw a similar mass exodus of short-term tourist traders. As was the case with previous bear runs, data points that there is still resolve from long-term HODLers and when the bears back off and the bulls step in, the market will surge.