How Bitcoin, Crypto Prices Correlate With Network Parameters
There is now enough data to link Bitcoin and crypto price movements to easily quantifiable network parameters.
Bitcoin’s Transactions Show Highest Correlation to Prices
Transaction counts, active addresses, and price action show a connection for some coins, which explains heightened activity during rallies. A recent report by Longhash suggests some coins may reveal the intentions of their holders, based on on-chain activity.
The correlations are visible both for a longer historical time frame and for the past two years when specific price movements were also reflected in transaction counts. Bitcoin (BTC) reveals the strongest relationship between on-chain transactions and price action. The connection is both long-term and historical but also linked to the latest rallies and price slides.
“Both the number of transactions and the number of active addresses appear to correlate fairly positively with its price. This makes sense, of course — the more people are using and transacting with Bitcoin, the higher we might logically expect the price to be,” commented Longhash.
Bitcoin daily transactions also picked up from January 1, when they fell to a low of 250,000 per day. As the prices moved up to a higher range, Bitcoin on-chain transactions are now closer to 350,000 per day.
A similar relationship is seen for Litecoin (LTC), which is widely represented on exchanges. Both coins can be moved between markets for arbitrage. Additionally, heightened activity may be related to realizing profits. Ethereum (ETH) shows heightened transactions, though with a weaker correlation to market prices.
Token Transactions Rarely Reveal Price Trends
But beyond classical “coins”, tokens show a different picture. For networks like TRON (TRX), there is almost no correlation, or only very slight one, between price action and transactions. TRX tokens may be moved without fees, leading to high-count transactions, which are not always linked to using exchanges.
For Binance Coin (BNB), there is also an inverse correlation between token movements and price action. The reason for this is that BNB, like other native exchange tokens, is mostly used within the Binance ecosystem, for trading or other fees and investment activities. For that reason, BNB is not always stored on personal wallets, and actually resides within the exchange.
Longhash warns not to rely on transaction count levels for price action. For Bitcoin, rapid selling also leads to temporarily heightened transactions. Additionally, not all BTC price action relies on physically moving coins, as futures markets often don’t require a Bitcoin collateral or physical delivery.
What do you think about price and transaction count correlations on various crypto blockchains? Share your thoughts in the comments section below!
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