2020 was a very important year for Bitcoin that surpassed its previous historical maximum (ATH), established in the infamous 2017 bull run. Taking a trend from last year, the last 7 days of 2021 were no different. Bitcoin has repeatedly appeared on the news for overcoming itself, reaching more than $ 41,000 and has since stabilized just below that. However, an interesting metric appears to be moving slowly down.
According to a recent report by LongHash, Bitcoin and its active addresses are now moving in a rather curious way. As the currency continues to move upward on the price charts, its correlation with the count of active addresses is going in the opposite direction. This, in turn, suggests that such a factor appears to have a minor impact on the confidence of new investors and the price of BTC.
To be clear, Bitcoin's count of active addresses is increasing – in fact, it's close to a historic record. But it is not as correlated with the price of Bitcoin as it used to be, according to a Pearson correlation analysis performed by LongHash using data from Quandl.
Bitcoin and its active addresses have always shared a high correlation if we look at the network's historical data. In other words, whenever the price increases, the number of active addresses also increases. Despite the continued positive correlation between these two aspects of Bitcoin, LongHash's report noted a subtle change.
If we reduce the scope to just 2020 data, however, that number drops to 0.55 – still a strong positive correlation, but not as strong as it has historically been. And if we reduce the scope even further, for data from August 1, 2020 to January 4, 2021, the number drops again: 0.28, a weak positive correlation.
This highlights how throughout 2020 the price of Bitcoin detached itself from its count of active addresses, which is quite different from the 2017 bull run, which observed a positive correlation of 0.82.
One of the main reasons why this change is taking place in the strong Bitcoin bull race is again due to the change in its audience. The 2020 bull run was largely driven by large-scale institutional investments that involve high-volume businesses that do not require many BTC addresses.
Although addresses have increased over 2020, according to Glassnode data from 700,000 to 1,300,000, the slight drop in the correlation between price and active addresses may be another factor that suggests not only the evolution of the Bitcoin landscape , but it also suggests changes in the Bitcoin user base.
While Bitcoin remains the most commonly used cryptographic token for online payments, its share has dropped substantially: from 89% of cryptocurrency payments in June 2020 to 79% in November 2020, the report concluded.
Read more: Dollar starts the year higher. What to expect for 2021?
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