As exchanges increasingly deploy transaction batching techniques (processing multiple client withdrawals in a single transaction), transaction counts alone can be misleading. Thus we must also assess the number of active on-chain entities.
We can see however, that a very similar pattern is in play which speaks to the more bearish case of reduced participation being a dominant driver. This adds weight to the argument that the market may be dominated by HODLers and traders, with less participation by newer entrants and retail speculators.
Active Entities Live Chart
We can confirm this by looking at the Entities Net Growth metric which describes the difference between new on-chain entrants (holding new coins), and those leaving the network (spending all their coins). Here we can see with each market cycle a rising 'floor value' of new entities. This describes Bitcoin reaching a wider audience over time, and the size of the consistently buying HODLer base. We can also see that bull markets experience a steep increase in new participants, many of which slow-down after market tops.
The current market has returned to the upper bound of the 2018-20 bear market baseline, of around 13k new entities per day.
Entities Net Growth Live Chart
The assessment we can take away from this, is that the highest likelihood is that the majority of today's market participants, are longer-term HODLers and accumulators. The question is, can they hold the line and provide sufficient buy support?
If we look to the percent entities in profit, we can make two observations:
- Around 9.6% of entities hold coins, that were accumulated during August and September, and are now underwater (held at an unrealised loss). This represents a 58% retracement of the August high, suggesting a non-trivial number of buyers from May-July took profits on the way up.
- This fractal is remarkably similar to the July-October recovery after the March 2020 sell-off.
