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Bitcoin has remained on the downside, frequently retesting its previous lows as the broad crypto market continues consolidating.
Amid this, Bitcoin's network activity has slowed significantly, as the number of active addresses on the Bitcoin network recently dropped below 500,000 according to data showcased by crypto analyst Ali Martinez.
Bitcoin long-term holders show conviction
It appears that short-term holders are increasingly growing weak and they are exiting the market as the analyst revealed that Bitcoin's on-chain activity has cooled significantly over the past two weeks.
Per the data, the number of active wallet addresses holding Bitcoin has dropped from 821,000 to 494,000 within the last two weeks.
Notably, this marks a massive decline of 39.80% over the stated period. While this sharp drop happened amid the broader market consolidation, Bitcoin has continued to trade sideways as momentum fades.
Apparently, the price volatility coinciding with a major decline in active addresses indicates that short-term traders are increasingly exiting their positions.
What this means for Bitcoin
The analyst has pointed out that although decreases in network activity are usually bearish signals, the case might be a good sign for Bitcoin this time.
He noted that decreases in network activity during consolidation phases often mean that short-term holders and speculative traders are losing interest while longer-term investors maintain their positions.
As such, long-term holders are clearly showing conviction in Bitcoin as a larger share of its circulating supply is being left to long-term, high-conviction holders.
Notably, historical records show that similar periods of declining network activity have preceded major price breakouts once momentum returns to the market.
Although reductions in transaction activity are often considered bearish in the short term, analysts believe it is a potential sign of reduced selling pressure.