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4 On-chain Indicators Crypto Traders use to Track Bitcoin Network Activity

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VOC, Voice of Crypto, Bitcoin, BTC

When it calls to measuring details of the Bitcoin network, on-chain activity is one of the significant factors that come into the limelight.

Such metrics describe the health, growth, and other important intricacies of the Bitcoin network. It gives useful insights about the user base and daily active users and helps decipher the Bitcoin network effects.

Generally, network effects mean an increase in the number of current network participants. This eventually increases the value and utility of the network.

Bitcoin Network Active Addresses

When a Bitcoin network user sends coins from one address to another through their wallet, they usually interact with the network.

This could be any transaction, withdrawal, deposit to an exchange, a payment to someone, or shifting funds to another personal wallet.

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This metric shows how many users were active on the Bitcoin network each day.

Increasing Trendline: This basically indicates an increase in activity, new users, and attention. As more and more users interact with their Bitcoin wallets. This clearly indicates a healthy network suitable for creating a bullish sentiment in the market.

Decreasing Trendline: On the contrary, this is indicative of falling demand, hence the lower activity in terms of network usage. This is directly associated with bearish sentiment in the market.

Number of New Addresses

Similar to active addresses this metric is a little more advanced. This metric tracks when entries that have never received coins enter the market.

Since most Bitcoin wallet software generates a new address for every transaction, this metric behaves similarly to Active Addresses

Higher the value of the metric, the higher signal of increasing network effects. This is directly linked to increasing network effects. On the contrary, when the network is less active that day, fewer entities are interacting, therefore its signals decreased network effects.

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Bitcoin Network Transaction Counts

This metric feature measures the total number of confirmed transactions each day. They include all types of transactions. Simple transactions include payments, exchange deposits, withdrawals, etc.

When there is a higher trend in transaction counts, it is an attribution of increasing demand for value settlement and block space.

Otherwise, a declining trend means fewer transactions were being sent out that day. This suggests a lower demand for value settlement and block space. It gives signals for decreased network effects.

One thing to note, while analyzing transaction counts, try to consider new technological capabilities. Like transaction batching done by exchanges can influence the deposit records.

It is more suitable to compare transaction counts to recent historical changes where technological conditions were alike.

Transfer Volume

This metric measures the total amount of Bitcoin sent across the network daily.

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An increase in value is an attribution of higher value settlement in terms of bitcoin on the network. This is suggestive of increased utilization and greater demand for the orange coin.

On the contrary, when less volume is transferred over the network, the utilization declines, and less value is transferred on the network.

While you’re accustomed to these indicators, check out our previous post on Bitcoin Network’s performance through analysis using a few indicators given above.

Jatin Sewani is crypto markets writer/reporter based in India. He is skilled in onchain as well as technical analysis. He's currently pursuing actuarial science which lets him look at things from a risk-based perspective.

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