This article is from the Glassnode Chain Weekly Report"The Week On-chain (Week 23, 2021)", translated and organized by Coin World Research Institute.
Translated by: Winy Huang
On-chain activity and value settlements have fallen sharply, and the direction of the market remains unclear.
Whether it is price movements, or the demand for on-chain transactions and value settlements, the Bitcoin market has experienced a relatively calm week. This past week, Bitcoin traded in a tight range between a high of $39,242 and a weekly low of $34,942.
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The memory pool is no longer congested
A characteristic of a bull market is that the demand for on-chain transactions and value settlements will increase, and the urgency to join the block will also increase. The end result is that activity, transaction volume, and priority fees all soar. This is a result of increased demand from investors and will also incentivize veterans to sell bitcoin at a higher price. Especially in the past week, the growth of on-chain demand has slowed down significantly, and some on-chain indicators have also dropped significantly.
Since January 2021, the number of Bitcoin active addresses has remained at about 1.15 million per day, on par with the peak in 2017. It should be noted that in 2017, this level was only maintained for a few days, and then fell by more than 33% in the first major sell-off. In the current cycle, this high level of on-chain activity has lasted 5 months.
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Real-time graph of the number of active addresses
The number of active entities also fell back. On-chain unique entities fell back from a high of 375,000 to around 250,000, again in line with what happened between late 2017 and 2018. Because as the price falls, users' interest in the asset will weaken.
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Real-time chart of the number of active entities
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Change Adjusted Transfer Volume (in USD)
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Real-time chart of ETH transfer volume
As the demand for on-chain transactions has declined, average transaction fees on the Bitcoin and Ethereum networks have similarly decreased. In April and May, average transaction fees hit all-time highs and spiked over $60 on both protocols in short order. Currently, average fees across both networks have now returned to mid-2020 levels, roughly in the $3.50 to $4.50 range.
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BTC vs ETH average transaction fee comparison chart
supply dynamics
Over the past month, a total of 160,700 BTC has returned from illiquidity to liquidity circulation. And these bitcoins, which we once classified as illiquid, provide an indirect measure of supply after they flow into the market again.
Importantly for nodes, these 160,700 coins represent only 22% of the bitcoins that have moved from a liquid state to an illiquid state since March 2020. This means that over the past 14 months, 744,000 BTC have been stored in cold storage. Despite the recent volatility, 78% of these bitcoins have not yet been transferred.
Throughout May, the total number of addresses with non-zero BTC balances decreased by a total of 1.2 million. Unlike the over 60% drop in transaction demand and other indicators of activity, the number of non-zero addresses (those that actually sold all of the Bitcoin) dropped only 3% compared to the new Bitcoin price high. At its peak in 2017, nearly a quarter of addresses sold bitcoin. Compared with the two, the current is indeed only a relatively small net change.
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Real-time chart of the number of addresses with non-zero balance
We can compare the two versions of the "Spend to Profit Ratio" (SOPR) metric and see that most people who spend Bitcoin have the following characteristics:
a) the loss is realized;
b) Spend by short-term holders.
We explain the following diagram with some initial points of SOPR:
The SOPR value indicates a market realized profit (>1.0) or loss (<1.0) size. Larger peaks/troughs mean larger realized profits/losses.
The aSOPR variable involves the entire market. It improves the metrics by filtering out relay transactions with lifetimes less than 1 hour (no economic significance).
The STH-SOPR variable only includes bitcoins that have been sold for less than 155 days to capture new investors and filter out long-term holders.
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aSOPR and STH-SOPR comparison chart
The supply held by long-term token holders (LTH) began to accelerate. The threshold of LTH status is UTXO (unspent transaction output) that has been dormant for 155 days. Therefore, the chart below mainly depicts investors who bought Bitcoin between the end of 2020 and January 3, 2021 and have not yet spent it.
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Real-time chart of LTH (long-term currency holder) position changes
LTH now holds 10.9 million BTC, accounting for more than 58% of the circulating supply. Notably, LTH now holds 2.3 million more BTC (8% of circulating supply) than at its peak in 2017.
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LTH supply real-time chart
Activity on the DeFi chain slows down
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Real-time graph of DeFi indicators
Finally, we can see that Uniswap’s daily transaction volume has dropped by 28% since its peak in mid-May, indicating a slowdown in user demand for tokens. The number of daily transactions on Uniswap has also returned to the daily level of 160,000 transactions per day.
