Active Addresses Ratio
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Active Addresses Ratio monitors the percentage of addresses in a blockchain that are active in comparison to the total number of addresses with a balance.
This ratio highlights how active users of a blockchain are on average. In general, most crypto-assets see a declining trend in their long-term active addresses ratio, not because these networks are less active but because average addresses appear to simply hold these assets rather than use them on a recurring basis.
Given crypto’s speculative nature, active addresses tend to spike along with prices. This is likely due to retail users following buying when prices are in an upward trend. As a result, the Active Addresses Ratio indicator can be helpful to assess the level of speculation in the market for a particular crypto-asset.
Over the long-term (5-10 years) it is possible that this indicator becomes less related to price activity as more ‘organic’ demand grows for crypto outside of price speculation.
As you can see in the graph above, peaks in Ethereum’s Active Addresses Ratio tend to coincide with peaks in ETH’s price. Therefore, as an user, you can use this indicator to have a better understanding of when speculative trading is likely to be increasing to anticipate price drops and potential signs of a bubble.
