Bitcoin Faces Major Network Drop: Is Market Instability Looming?

• Bitcoin’s network activity dropped 17% in Nov 2024, raising concerns about market stability amid low engagement.
• Despite price growth, Bitcoin’s network activity remains below trend, signaling potential volatility and lower market participation.
• Price changes and periodic variations in Bitcoin’s network activity are correlated, suggesting instability and potential market corrections.

As of November 20, 2024, network activity has fallen by 17%, the first major drop since May 2021. During the period, China’s ban on Bitcoin mining saw activity reduction go sharply down. Currently, Bitcoin’s network usage remains below the long-term trend, raising concerns about market stability.

Julio Moreno, an analyst at CryptoQuant, reported this decline in a recent analysis. The CryptoQuant Network Activity Index highlights major fluctuations in Bitcoin’s network engagement. The index tracks price movements, network activity, and drawdowns. A strong correlation between price shifts and activity changes continues to emerge.

Market Trends and Network Drawdowns

The Bitcoin price between early 2020 and mid-2019 traded between $10,000 and $6,000 and moved in relation to a relatively low network index. There was a first 28% drawdown in early 2020 during increased volatility.

By early 2021, Bitcoin surged past $60,000 before facing another 28% activity drawdown. The market experienced heightened instability, causing a steep decline in network participation. Between mid-2021 and early 2022, Bitcoin’s price peaked again but soon plummeted. During this period, the network activity drawdown reached 21%, indicating weaker engagement.

Bitcoin started to regain in mid 2022 and completed in late 2023. Between $20,000 and well over $40,000, prices and activity both moved, and activity did likewise. In early 2025, Bitcoin crept near $50,000, but activity remained well below trend.

Long-Term Outlook and Market Implications

The 365-day moving average of the CryptoQuant Network Activity Index shows consistent long-term growth. However, periodic fluctuations suggest ongoing instability. The latest 17% drawdown indicates weaker market engagement despite the price rebound.

Moreover, lower network activity could signal reduced on-chain transactions and overall market participation. Historically, major drawdowns aligned with price corrections or regulatory events. This trend raises concerns over Bitcoin’s market strength in the coming months.

Additionally, the network activity decline could impact investor sentiment. Traders often monitor engagement levels to assess Bitcoin’s health. If activity remains below trend, potential volatility could emerge.