Bitcoin News: Network Activity Cools Down to 8-month Lows

As per latest Bitcoin news, volatility has tanked considerably now that uncertainty has crept back into the market.

Demand has clearly cooled down and this is evident in some of the Bitcoin network’s key metrics.

Recent analysis revealed that Bitcoin transactions have been declining and have since cooled to 8-month lows.

As a consequence, network fees have also dropped to extreme lows.

The decline in Bitcoin-related activity is a far cry from the impressive heights of network activity observed in November.

These observations highlight the massive sentiment shift which underscores the loss of confidence among investors.

– Advertisement –

The declining network activity also highlights the risk of more Bitcoin price downside.

BTC price action has been moving sideways for the last 10 days despite the bearish start this month, reflecting the weak demand in the market.

Declining Risk Appetite May Lead to Capitulation

Concerns about the possibility of another bearish wave for Bitcoin is not just based on network activity.

BTC flows also contribute to those concerns as explained in a recent CryptoQuant analysis.

The analysis was based on the Inter-Exchange Flow Pulse (IFP) indicator which assesses spot and derivative flows.

It usually flashes bullish signals when a lot of Bitcoin is transferred to derivatives exchanges and bearish when funds are moved from derivative exchanges to spot exchanges.

The IFP recently switched into negative, indicating that the market is leaning more towards the bearish side.

The indicator aligns with the recent price action which demonstrated weak demand, but it could also foreshadow growing risk of more downside.

The potential for a bearish outcome also aligns with the latest market conditions.

One of the main reasons for this is the recent FED report which revealed that rate cuts would be put on hold due to the rising consumer inflation.

Rate cuts have traditionally been seen as bullish events because they pave the way for more liquidity injection in the market.

A pause on rate cuts thus puts investors on the edge, hence explaining the lower risk appetite.

Bitcoin News: What Should Investors Look for Moving Forward?

Bearish expectations also mean investors are curious about the next major move and what to anticipate for bullish recovery.

Sticky inflation may have a negative impact on investor sentiment but the opposite is also true.

Lower interest rates may thus trigger a favorable outcome for Bitcoin bulls sometime down the road.

The biggest potential catalyst that investors are eagerly anticipating is the announcement of a Bitcoin strategic reserve use case for Bitcoin.

This could trigger an avalanche of more demand for BTC.

For Bitcoin, prevailing market sentiment social economic factors in news also contribute considerably.

Other unexpected white swan events may occur somewhere down the road.

For now, the downside risks are significant, but its latest price action also suggests that quite a significant amount of BTC remains unmoved.

It may also signal that the downside may also be limited on account of the long term bullish expectations for 2025.