The Bitcoin (BTC) network is showing signs of contraction, which could lead to a potential price drop.
As the number of wallets decreases, it indicates a lower demand for the cryptocurrency, and a decrease in user adoption rates, according to the network analysis by crypto market expert Ali Martinez on May 8.
When there are fewer wallets, it means that fewer people are actively using Bitcoin. In turn, this lowers the demand for the cryptocurrency, which can lead to a drop in price. This trend is particularly concerning since the price of Bitcoin has already been volatile in recent months, with Bitcoin creating a series of lower highs and lower lows.
The decline in user adoption rates can be attributed to several factors. For instance, some investors may have shifted their focus to other cryptocurrencies or investment opportunities, while others may have been deterred by the high fees associated with using Bitcoin in the last week, with it spiking to the highest level since May 2021.
Bitcoin price analysis
Crypto analyst Michael van de Poppe has weighed in on the recent price action around Bitcoin, providing insights on potential price levels to watch in the coming days. In a recent tweet, van de Poppe noted that the key level to break for Bitcoin was $29,200, but despite a bounce towards it, the level was not broken.
In addition to this, there has been some FUD (fear, uncertainty, and doubt) regarding Binance, a major cryptocurrency exchange, which could add to the negative sentiment around Bitcoin as it temporarily halted withdrawals with the flagship digital asset.
Looking ahead, the trading expert suggested that potential longs could be found at $27,400 or $26,800, with a target towards the CME gap at $29,600. This indicates that van de Poppe sees potential for a rebound in the price of Bitcoin, but investors should be cautious and monitor the situation closely.
Finally, Bitcoin continues to experience a bearish trend, with the cryptocurrency currently trading at $27,973, representing a 2.87% decline in the past 24 hours. Over the past week, Bitcoin has also declined by 1.97%, indicating the continuation of a bearish market.
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