Bitcoin has once again exceeded expectations for the month of October. The price of the digital asset had grown from its lows of $ 40K to over $ 57K at the time of writing. Its recovery trends have put it on a path of least resistance towards the previous all-time high of $ 64K. But on-chain metrics have shown even more favorable trends among investors in the asset.
Active Bitcoin entities (i.e. the number of active users on the blockchain each day) paint a bullish picture for the asset going forward. This metric had fallen between May and September 2021, approaching the lows seen in January 2020 when the bear market was still in full force. However, there has been a significant increase in the number of entities active on the blockchain after the bull rally that started in early October.
Active Bitcoin Entities Increase 19%
Glassnode data shows that Bitcoin Active Entities have seen a surge in recent weeks. At its lowest, active entities fell to just over 200,000 this year, more than 50% from its peak of over 400,000 between January and February 2021. As the asset price has started to skyrocket again, so has the number of active entities. .
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The importance of this is shown in the price movement. The last time active entities saw a significant rally, the market had seen a bullish rally that put the digital asset on a path to new all-time highs. While the increase in active entities may not be significant this time, it may still have the same connotations for the market.
Bitcoin active entities grows 19% in a week | Source: Glassnode
If history is something to go through, then the increase in active entities means a renewed interest in the market. And one thing that has always preceded a bull run has been return interest, which often ushers in a long bullish rally.
BTC loses footing at $57,000, falls to $55,000 | Source: BTCUSD on TradingView.com
More bullish signals
Active entities is not the only metric that registered an increase. In the same report, Glassnode describes that the average amount of bitcoins being traded is on the rise. The average transaction size on the blockchain grew to 1.3 BTC, approaching the 1.6 BTC levels that were seen with the March 2020 liquidity drop.
Like active entities, a metric cannot determine on its own how much the price of an asset will appreciate or depreciate. But as the report points out, the increase in average transaction size shows greater interest from institutional investors who have more money to put on the market.
If the average transaction size is now more than 1.3 BTC, then the dollar value of these transactions is more than $ 60K. This type of money moving through the market shows inflows from richer investors, which could very well increase the value of the digital asset. Although it is also important to note that institutional investors generally invest when the market is heading down. So these accumulation patterns could represent the beginning of a decline as institutions begin to fill their pockets.
Featured image from FX Empire, chart from TradingView.com