In the recent period, Bitcoin [BTC] has encountered a notable correction in the market, coupled with a sharp decrease in trading activities which have dropped by 62%. This decline indicates reduced demand and a decrease in market participants.
The reduced number of participants has brought about discussions among analysts regarding the crucial role of individual investors in driving a BTC rally. One such analyst is Burak Kesmeci of CryptoQuant, who has proposed that Bitcoin requires over 54 million individual investors to initiate a rally.
The Significance of 54 million Individual Investors
Through his analysis, Kesmeci has pointed out that a surge in individual investors is a fundamental prerequisite for the anticipated bullish rally of Bitcoin.
He emphasizes that for Bitcoin to experience a price surge, it must surpass the threshold of 54 million individual investors. Following a decline to 43 million in January 2023, the number of individual investors steadily climbed over the subsequent 12 months, reaching 52.4 million, marking a 22% increase. However, this figure dropped to 51.6 million in February 2024 following the approval of ETFs.
Subsequently, during the rally in March 2024, this number saw a continuous rise, peaking at 54.14 million in June before observing a subsequent decline in individual investors.
There exists a strong historical correlation between the number of individual investors and the fluctuations in BTC prices. Notably, in January 2023, Bitcoin witnessed a 300% surge when the number of individual investors surged.
Conversely, after reaching its peak in June 2024, the Bitcoin price experienced a decline.
Current Downtrend in Bitcoin Participants
Kesmeci’s analysis underlines the imperative nature of an increased investor count for facilitating a BTC rally, indicating that new participants are crucial for price escalation within the BTC blockchain. The critical question remains – are new investors entering the market?
According to CryptoCrypto’s assessment, Bitcoin has been encountering a drop in participant numbers.
For instance, the daily active addresses in the Bitcoin network have seen a consistent decline, falling from 1.1 million to 899k over the past week. This downward trend suggests a diminishing influx of investors into the market, presenting a decrease in individual investors.
Furthermore, the transaction count for Bitcoin has also witnessed a decline from 834k to 598k during the same period, signaling reduced demand for BTC as fewer investors are actively using the blockchain.
Evidently, Bitcoin is currently confronted with a dwindling number of participants, a scenario that typically leads to market corrections, as evidenced by the recent period where Bitcoin traded at $67,074. Should this trend persist, Bitcoin might experience further decline, possibly reaching $65,757.