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Stability vs Speculation: As Bitcoin wallets activity ratio tanks to a lower low since 2010.

by Thelma Opurum

The amount of bitcoin (BTC) wallets activity has tanked to a lower low last recorded in November 2010. This information was made known from on-chain data released by IntoTheBlock. 

During the past few days in June 2024, the weekly active wallet ratio dropped to a low of 1.22% while peaking at 1.32%. The month’s highest ratio (1.32%) was last observed in November 2010.

Also, the number of BTC wallets dropped drastically, creating multi-year lows. During the last week of May 2024, 614,770 BTC wallets were active, the lowest recorded sinceDecember 2018. 

What could be behind the drop in BTC wallets activity?

This significant drop in BTC wallets activity has been attributed to a combination of social and economic factors globally.

First, with the introduction of Bitcoin ETFs, the impact of institutional investors is relatively higher than that of retail investors. In past cycles, BTC wallets activity was higher because there was higher retail participation in the BTC market.

Second, as Mt. Gox trustee plans to start distributing payments to creditors this month, July 2024, investors appear to be bracing for any significant price BTC movements. Noticeably, large BTC whales, including the German government transferring millions of dollars in BTC, have been selling their BTC holdings recently.

Third, the lack of retail participation in BTC wallets is caused by new meme coins increasingly attracting speculators away from BTC and other cryptocurrencies. Memecoins have become increasingly popular recently, especially with new crypto adoptors. And unlike the days when traditional memecoins such as Shiba Inu and Dogecoin took all the shine, the noticeable trend is that new memecoins are getting most of the attention, at the risk of getting one’s hands burnt in pump-and-dump schemes in the ever-volatile memecoin space.

Also Read: Davido Coin and Davido’s Crypto Trail: A Pattern of Pump and Dump?

Any Possible Connections With Runes?

Are there possible links or connections between the drop in BTC activity ratio and Runes? 

Runes, the fungible token protocol launched in the Bitcoin ecosystem after April’s Bitcoin halving event.

Runes was launched to help miners with an alternative route for revenues. It achieved its purpose on the first launch day, and miners could pocket large chunks of transaction fees. Simply put, what miners lost in block rewards, they made up for in transaction fees.  

However, gradually, the transaction fees have come down, back to their lowest price before the halving ceremony. 

Meanwhile, the activity ratio on Runes has also dropped low, due to the cyclical nature.

Read Also: Memecoins just go up and down in price and contribute nothing of value in their wake, says Ethereum Founder

The Bigger Picture: For higher-reward seeking investors, speculation trumps stability.

Notably, there is a shift of investor sentiment from looking for stability and profitability by investing in BTC to looking for higher rewards by investing in more volatile coins and tokens. In other words, the more institutional investors put their money in BTC, the less speculative it would become the typical retail-driven speculation is bound to reduce significantly. Investors want something more risky. After all, the higher the risk, the higher the rewards! 

Regarding the trend above, Chiagozie Iwu, independent blockchain strategist and Ex CEO of the defunct Naijacrypto exchange, thinks the trend is not a surprise considering the current cryptocurrency landscape globally. “When it comes to crypto trading these days”, he asks rhetorically, “how many retail traders really trade BTC outside institutional investors?”

Confirming our findings regarding memecoin and speculation, Mr. Iwu observed that “the activities of retail traders today have the tendency to turn towards things like memecoins, crazy Solona-based tokens, and other similar tokens. Even on DeFi platforms, more people are doing memecoins and other tokens than the big cryptocurrencies like BTC and even Ethereum.”

Another interesting dimension Mr. Iwu shared with CAB is that since most trading is completed on centralized exchanges, BTC wallets activity will not be  affected, and consequently does not necessarily reduce trading activity. “Most custodian holdings are on centralized exchanges, resulting in more crypto accounts than crypto wallets. In other words, you have more people with accounts on centralized exchanges than actual stand-alone, self-custody wallets. The average user deposits on the crypto exchange, either fiat or stablecoin. These users may then buy themselves BTC which does not affect wallet activity because it is just the account within that exchange that is either debited or credited. Over time, because you have more retail investors that just want simplicity and clarity in the trading process, they tend towards centralized exchange accounts more than self-custodial wallets where they run the relatively higher risk of losing funds due to lack of knowledge with maintaining self-custodial wallets. These trading activities on centralized exchanges do not affect wallet activity and might not necessarily reduce trading activity. It just shows that many people are trading on centralized exchanges.”

Read Also: Ethereum and Altcoins: What are the Opportunities in the Altcoin Market?

A Bearish Outlook for BTC in the Immediate Future

BTC may continue to experience a bearish outlook in the immediate future as BTC miner incentives continue to reduce after each bitcoin halving. Miner reserves, representing new BTC held by miners, are at 14-year lows as well. Clearly, it’s all about the economic incentives! Here, altcoins are expected to become the alternative path to more rewarding speculative investments, regardless of the relatively higher risks they may portend for investors. 

Meanwhile, at the time of writing, BTC price has fallen below $55,000 over the past 24-36 hours, representing about a 6% drop. This is for the first time since May 1 2024 below the $57,000 mark, according to data from CoinGecko. In March 2024, BTC price hit an all-time high of above $70,000, following the approval of the first U.S. spot bitcoin ETF.

The current low BTC wallets activity ratio might be a perfect time for investors to make slow and rising whale movements though. Some investors generally believe that with large BTC holders, including governments, selling their holdings, this may be a great time to acquire more BTC. Whatever you do, speculative crypto investments remain highly risky, whether you grab the legs of a bear or grip the horns of a bull.

Also Read: Oversold Territory: Is bitcoin due for a bounce or further decline?