Despite the recent gains in bitcoin and ether prices, perhaps driven by news from the Federal Reserve and the US president. But Glassnode believes that there are no signs of a bear market trend reversal. The reason is that the transaction fee is low and there is a lack of new active addresses.
Is Bitcoin’s recent rally an illusion?
Bitcoin rallied last week, recouping some of its losses, saying goodbye to weeks of price declines and breaking above $24,500, a six-week high. The Federal Reserve raised interest rates by 0.75% and U.S. President Joe Biden refused to admit that the U.S. had slipped into a recession, even as gross domestic product (GDP) numbers shrank for two straight quarters.
However, Bitcoin price has not been able to continue its gains in recent days and has also fallen below $23,000. In its latest report on market conditions, Glassnode blamed relatively low internet usage for the price drop.
This is evident from network fees. Because network fees usually spike when more users interact and transact on the Bitcoin blockchain. But Glassnode points out, “We haven’t seen a huge jump in fees yet.”
Additionally, Glassnode noted after observing current network activity that active addresses rarely see an influx of new demand, other than a brief surge after some “great capitulation events.”
Ethereum fees show the same. If the short-term currency price performance can be judged based on network congestion and handling fees, then the results of Ethereum are obviously very similar.
Fees on the ethereum blockchain have now dropped to multi-month lows, averaging less than $5.
This will be a problem for Ethereum. Due to a lack of internet usage following the implementation of the London hard fork EIP-1559 last year, it has been impossible to burn enough ether. As a result, Ethereum is once again facing a high level of inflation.
Nonetheless, the Ethereum community hopes that this situation will change soon. The reason is that the “Merge” upgrade towards Proof of Stake is scheduled to happen in the next few months.
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