Bitcoin Faces Strain: Unstoppable Growth or Imminent Correction?

February 24, 2025 by Mwongera Taitumu

• Bitcoin’s new addresses drop, signaling lower on-chain activity.
• Market cap remains strong despite declining network fundamentals.
• Bitcoin price fluctuates amid rising long and short liquidations.

Bitcoin’s on-chain activity is experiencing a decline, as seen in the recent drop in the monthly average of new Bitcoin addresses. This trend has raised concerns about Bitcoin’s network utilization, hinting at potentially weaker network fundamentals. The fall below the yearly average points to a decrease in on-chain interactions, which may affect Bitcoin’s long-term value.

Shifting Trends in Bitcoin’s On-Chain Data

Data from Glassnode reveals a noticeable dip in Bitcoin’s network activity, with new addresses falling behind the yearly average. The decline could indicate reduced interest in using Bitcoin for transactions and other on-chain activities. Historically, such downturns are linked to weakening in network fundamentals, which could lead to less utilization.

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Bitcoin’s spot market inflows and outflows show a mixed picture, with inflows fluctuating heavily between positive and negative. The market’s volume trends also seem inconsistent, with larger fluctuations indicating shifting investor sentiment. However, Bitcoin’s price remains strong which reflects broader confidence in its value amid a drop in the short-term network activity.

Network Fundamentals and Investor Behavior

The decrease in new Bitcoin addresses might suggest a shift in investor behavior, away from purely transactional use of Bitcoin. This change could imply that more users are either holding Bitcoin long-term or using it for other purposes.

Furthermore, analysis of Bitcoin’s spot market inflows suggests that market sentiment remains volatile due to random occurrence of larger inflows.

BTC’s Price and Market Capitalization

Although Bitcoin’s price maintains a steady upward trajectory, this does not completely shield the network from the effects of declining activity. Over the past year, Bitcoin’s market capitalization has surged significantly, to reach near the $2 trillion mark, as per CoinMarketCap data. 

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However, Bitcoin’s price, which reached nearly $120,000 in February 2025, reflects an imbalance between market valuation and network strength, raising concerns about sustainability.

The Impact on Liquidations and Market Volatility

Bitcoin’s price volatility continues to influence market behavior, especially regarding liquidations. Data from Coinglass shows a steady increase in long liquidations, alongside short liquidations, which highlights ongoing market unpredictability. Bitcoin’s price has fluctuated between $96,000 and $100,000 in recent weeks, which shows that the market is sensitive to both external factors and internal network changes.

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The decline in Bitcoin’s new address creation and fluctuating on-chain activity reflect a shift in market sentiment. Although Bitcoin’s price and market cap continue to rise, network activity and investor behavior suggest that the current growth may not be sustainable.

As Bitcoin navigates these fluctuations, it remains to be seen if it can maintain its momentum or face a significant decrease in adoption.

As at press time Bitcoin price was trading at $96,113