As Bitcoin continues to make higher highs by the day and ETH trails off in the distance, trying to break out, I'm taking a look under the hood to see what kind of wallet activity is going on with Bitcoin and Ethereum.
As you can see in the chart below, BTC and ETH active wallet addresses have been steadily trending up since early 2020 and are approaching historic levels not seen since January 2018. But what does this mean?
Well, it means a few things:
More transactions
Wallets transact with each other, so when the number of active addresses increases, that means more wallets are transacting. This means more people are using the Bitcoin network and are using it more frequently. As the Lightning Network L2 scaling solution for Bitcoin goes live in the not-so-far future, this will enable exponentially more transactions to be sent and received faster and at a fraction of today's cost.
New wallets
Not all old wallets reawake during bull markets. In fact, there is a huge percentage of Bitcoin holders who simply accumulate and hold, never selling. So if there's a steady increase in wallets, they can't all be existing ones, so that means there is a decent amount of new wallets being created on a consistent basis. Why are new wallets created? To buy Bitcoin/Ether.
More buying
This time around, it seems institutional investors have finally gotten the message and seem to be lining up to buy Bitcoin, whether it's as a store of value, adding it to a company's balance sheet, or simply to sell higher for a profit later on. Accordingly, another wave of retail investors appear to be buying in as well with many younger and even some older individuals buying some Bitcoin and Ether on their own through conventional exchanges.
One thing is for sure: the next wave is coming.
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