Crypto investors have returned to days of shallow volatility. Bitcoin has once again been stuck in the $26,000 range. We have seen that the price can linger within a narrow range for weeks, but the recent drop gives us important messages. Volatility may be on the rise and the sideways movement may have come to an end. So what’s next?
As bulls struggle to recover from the sudden crash on August 17, Bitcoin (BTC) has closed below $28,000 for the past 10 trading days. At the time of writing, the price was at $26,100. On-chain data can provide investors with insights for the next move.
On Monday, August 28, Bitcoin’s price dropped below $26,000 along with a slowdown in network activity. Derivatives market data indicates that trading activity in the futures markets could further intensify the downward trend in the BTC spot markets. Many network participants who have been disappointed with the sideways movement since BTC’s drop on August 17 are now avoiding trading. We have seen that the cumulative trading volume reached historical lows of $14 billion over the weekend.
The chart below shows how Active Addresses on the Bitcoin network have reached new lows since August 15. As of August 28, it is currently at 870,605, a surprising 36% decrease compared to the recorded 1.18 million Active Addresses on August 15.
The chart above shows that the number of investors using BTC for transactions has continued to decrease since the price drop on August 17. It is noteworthy that Bitcoin had fewer active users when it dropped to 859,363 on June 28. If this trend continues in the coming days, Bitcoin may experience further price drops.
The crash on August 17 resulted in crypto investors losing over half a billion dollars. Liquidations in futures markets seem to prevent investors from returning more cash to the market. Open Interest data supports this view. BTC open interest has decreased by 33% since August 17.
In conclusion, the lack of capital flow in the futures markets and the slowing network activity could push Bitcoin prices below $25,000 in the coming days. This could result in further losses for altcoins in the short term. On the other hand, if strategic investors bravely buy at the bottom, taking advantage of the downward trend, the $27,500 level may be tested after $29,000.