When analyzing the Bitcoin market, it’s equally important to understand the behavior of different market participants as it is to understand the technical foundations of Bitcoin’s price movement. On-chain analysis frequently analyzes short– and long-term holders, as their behavior is inherently different. However, Bitcoin’s maturity enables us to differentiate between large and small entities, as hundreds of institutions have populated the space and become a dominant force in the market.
Large entities tend to make strategic moves based on long-term outlooks and substantial market analysis. In contrast, small entities, typically retail investors, are more reactive and driven by short-term speculation and sentiment.
The relative activity of small and large entities is an excellent metric for distinguishing between these two cohorts. Although relying solely on this metric has limitations — such as oversimplifying the complex behavior of a diverse range of investors — it still offers a straightforward, binary check of market conditions. Glassnode’s metric differentiates between the median transaction volumes of small entities and the mean transaction volumes of large entities to reveal trends that suggest potential shifts in the market.
Since May 3, the activity levels of small entities, represented by the median transaction volumes, have consistently outpaced those of large entities.
The skewness in transaction volumes, where the average transaction size (mean) is larger than the typical transaction size (median), indicates that many small transactions happen frequently. This pattern is typical in Bitcoin markets and shows strong involvement from retail investors, who generally make smaller trades. When the activity of small entities is higher than that of large entities, it usually means the market is driven by retail investors’ excitement and speculation, often seen at the beginning of a bull market. On the other hand, if this activity decreases, it can suggest that retail interest is fading and the market might be stabilizing or consolidating.
On May 18, the median transaction volume of small entities reached a peak activity ratio of 3.194, while the mean transaction volume of large entities was at 1.916. This divergence shows a much larger base of smaller transactions, indicating increased demand and speculative…
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