Bitcoin's record-breaking price trajectory could be interrupted by this potential hurdle, potentially hampering the ongoing rally.
Bitcoin Rally's Sustainability Remains a Question Mark
The recent surge in Bitcoin's price has taken the cryptocurrency to new heights, with the digital asset nearing its all-time high of $124,000. However, the sustainability of this rally is a subject of debate, with concerns arising from the activity-price divergence and speculative sentiment.
According to data from CryptoQuant, the Activity-Price Divergence (APD) remains at -1.5, indicating that price growth is outpacing on-chain activity. This divergence can signal an overheated market prone to corrections.
On the other hand, the Miners' Position Index (MPI) is at -0.46, indicating that miner outflows remain below their yearly average. This reduction in miner-led supply pressure can help maintain market stability during periods of heightened volatility.
Moreover, on-chain activity has shown signs of improvement. The number of new addresses has increased by 25.47% in a week, and active addresses have risen by 11.11%. If this trend continues, it could narrow the price-activity gap and fortify long-term price support.
Zero-balance addresses have also fallen by 2.69%, indicating that more wallets now hold Bitcoin. If sustained, increased on-chain activity could further strengthen the market and support the rally's momentum.
However, Bitcoin's rally is seen as more driven by speculation and retail enthusiasm, raising sustainability concerns. Unlike Ethereum, which shows steadier institutional adoption and muted retail speculation, Bitcoin faces challenges such as regional adoption, energy consumption concerns linked to its Proof-of-Work consensus, and regulatory scrutiny.
Market outlooks predict that Bitcoin is in a maturing phase, possibly peaking between 2024 and 2025. However, macroeconomic factors like central bank policy, inflation, and global regulatory shifts will heavily impact its trajectory.
In summary, the sustainability of the current Bitcoin rally depends significantly on whether on-chain activity and fundamental adoption can catch up with the rapidly rising price, and whether speculative sentiment cools. Current data suggest the rally has room to grow but faces tangible risks of correction if speculative fervor outweighs actual network growth and institutional support. Ethereum’s steadier institutional gains present a contrast that some analysts see as more sustainable in the nearer term.
[1] Data and analysis from CryptoQuant. [2] CoinDesk, "Bitcoin is in a maturing phase, possibly peaking between 2024 and 2025." [3] Cointelegraph, "Bitcoin's energy consumption concerns: A growing challenge in its path to mainstream adoption." [4] Bloomberg, "Global regulatory shifts could impact Bitcoin's trajectory." [5] Glassnode, "Realized Profit & Loss (P&L) Ratio remains near historical averages."
- Despite the surge in Bitcoin's price, the Activity-Price Divergence (-1.5) indicates that the market might be overheated, suggesting potential corrections in the future.
- The Miners' Position Index (-0.46) indicates a decrease in miner outflows, which can help maintain market stability during periods of volatility.
- On-chain activity has shown signs of improvement, with an increase in new addresses and active addresses, which could narrow the price-activity gap and fortify long-term price support.
- Concerns about the sustainability of Bitcoin's rally arise from its reliance on speculation and retail enthusiasm, unlike Ethereum, which shows steadier institutional adoption.
