By comparing the 28 day change in price (%) with the 28 day change in active addresses (%) for Bitcoin we are able to create a short-term sentiment indicator.
Grey lines on the chart show the change in active addresses.
On the outer boundaries of those grey lines are standard deviation bands.
Dotted red line = upper boundary
Dotted green line = lower boundary
Orange line is the 28 day price change (%).
When the orange line reaches the upper boundary (red dotted line) it is indicating that short term market sentiment is overheated. Because the rate of increase in price is outstripping the rate of increase in active addresses.
Zooming in on the chart (left click and drag) we can see that this often corresponds with $BTC price (white line) stalling and/or retracing.
The opposite is true when the 28 day price change hits the lower boundary (green dotted line). Here market sentiment is overly bearish and we often see $BTC price then increasing thereafter.
In extreme market conditions the 28 day price change (orange line) aggressively breaks out beyond the dotted red and green bands. This is typically in a major market crash or in the latter stages of a bull market. I may add additional standard deviation bands to catch these moves but for now have left them off to keep the chart clean.
Pre 2015 data is quite volatile and messy so this charts starts at 01 January 2015.
Any information on this site is not to be considered as financial advice. Please review the Disclaimer section for more information.