Bitcoin resumes May highs with on-chain spike in activity

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Anyone who has paid attention to Bitcoin over the past few months will notice a subtle but significant change in its fundamentals. As the price of BTC returned to May’s high, just before the first capitulation event, there was a slight uptick in on-chain activity.

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Unlike the liquidation period which ran from May to the end of July 2021, there was an increase in Bitcoin transactions. This increase has resulted in an increase in network charges, as the explorer Mempool.space shows.

Source: Mempool.space

At the time of writing, a high priority Bitcoin transaction must pay 20 sat / vB to be included in the blockchain, one of the highest fees in the last month. Conversely, BTC is trading at $ 57,632 with a profit of 19.3% in the daily chart.

BTC on a rally in the daily chart. Source: BTCUSD Tradingview

Although the Bitcoin network is still a long way from the activity levels recorded when its price peaked, the rise is significant and could point to a sustained rally by the end of 2021.

According to a recent report from Glassnode, the increase in network activity suggests that new demand for Bitcoin could hit the market in the fourth quarter. The research company is seeing 19% growth in the number of individual participants on the channel over the past 7 days.

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This metric amounts to 291,000 active entities per day. Glassnode noted the following on what this might mean for BTC:

This value is comparable to the counts at the end of 2020 at the start of the last bull run. More active market participants have historically been correlated with increasing interest in the asset during early bull markets.

Source: Glassnode

In addition, there was an increase in the median transaction size in September. This metric stands at over 1.3 BTC, the research company said.

An increase in the median deal size doesn’t necessarily imply a continuation of the current rally, but suggests more institutions are entering the market, Glassnode added:

Generally speaking, the times near the end of bear markets are when smart money starts to pile up. These periods are often characterized by weaker (but rising) on-chain activity and increasingly large transactions.

Bitcoin going to enter a bullish phase?

Additional data provided by Glassnode indicates an increase in some important metrics. For example, the Bitcoin Percent Supply in last week’s earnings hit a 4-month high.

The trading volume in the BTC perpetual futures contract reached a 3-month high of $ 281,278,010 on the Bitfinex crypto exchange. This suggests that the derivatives market is also starting to heat up and could again become a hindrance for BTC bulls.

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However, the transfer volume as a percentage of the cap achieved, a metric used to compare on-chain activity with the value stored in Bitcoin, recently exceeded 3%. As Glassnode has indicated, this suggests that BTC could be on the verge of entering a bullish market phase.

Transfer volume again exceeded the 3% threshold, suggesting increasing demand for on-chain value settlement. This is a bullish development to watch in the coming weeks due to its historic high signal.

Source: Glassnode

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