Crypto analytics firm Glassnode warns bitcoin is in danger of a bearish downturn in response to a decline in overall market health. 

According to an update, Glassnode analysts claim bitcoin’s on-chain fundamentals saw a distinct decline over the past week. The GNI index, which measures the overall state of bitcoin’s network, declined by 13 points to an overall value of 60. 

The report claims the drop in GNI was driven primarily by a decrease in investor sentiment and liquidity and continues a trend that has been developing since mid-May.

bitcoin gni indexBitcoin GNI Index | Source: Glassnode Inisghts

While network health remains relatively high at a value of 78 points, the metric fell 7 points from the week before as bitcoin witnessed a decline in growth and overall activity. The report says investors should pay particular attention to the index’s current downward trajectory, which could signal a contraction in on-chain usage. 

After gradually increasing since August of last year, bitcoin’s liquidity fell 14 points, dropping to its lowest value since January 2020. Glassnode claims the sudden drop was caused by a decrease in exchange inflows and on-chain transaction volumes. 

Glassnode also highlighted a massive drop of 20 points in bitcoin’s sentiment category.

According to the report, 

This has been driven by an overall decrease in economic activity in relation to the price of BTC, as well as a slowing down of hodlers' accumulation behavior; while hodlers are still accumulating, the rate at which they are doing so is declining.

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