FameEX Hot Topics | Bitcoin Network Activity Hits One-Year Low

Bitcoin’s network activity has recently fallen to its lowest level in a year, marking a sharp decline from the previously high levels of engagement. Research by Cryptoquant reveals a significant drop in user activity and transactions on the Bitcoin network, signaling a shift in the blockchain’s dynamics. This decline suggests a cooling-off period for the network, raising questions about the factors driving this trend and its potential implications for Bitcoin’s future.

According to Cryptoquant’s Bitcoin Network Activity Index, a key metric for tracking transactions and engagement, the index has dropped by 15% since November 2024. It now stands at 3,760, its lowest point since February 2024. Additionally, daily Bitcoin transactions have plummeted from a peak of 734,000 in September 2024 to just 346,000—a 53% decrease. This downward trend highlights a period of reduced engagement, as fewer users are actively participating in the network.

A major factor behind this decline is the collapse in usage of the Runes protocol, which was introduced in April 2024 to enable token minting on the Bitcoin network. Initially, the protocol drove a surge in activity, but its rapid decline has significantly impacted overall network engagement. A key indicator of this drop is the reduced use of OP RETURN codes, which are essential for tracking token-related activities like minting and transfers. The sharp decline in these codes reflects reduced interaction with the protocol.

When the Runes protocol launched, it caused OP RETURN codes to peak at 802,000 daily uses. However, this number has since fallen dramatically to just 10,000, highlighting the protocol’s declining relevance. This reduction directly correlates with the overall decline in Bitcoin’s network activity, as fewer tokens are being minted or transferred. The collapse of the Runes protocol has removed a key driver of engagement, contributing to the broader slowdown.

Cryptoquant’s report also notes a drop in Bitcoin’s mempool, where unconfirmed transactions are stored before being confirmed by miners. A smaller mempool indicates fewer pending transactions, further underscoring the slowdown. Despite this, Bitcoin’s price remains high, currently trading between $98,000 and $99,000. However, researchers suggest the cryptocurrency may be overvalued, as its fair value, based on network activity, is estimated at $48,000 to $95,000. This discrepancy raises concerns about Bitcoin’s current valuation and its alignment with network fundamentals.

Disclaimer: The information provided in this section is for reference only and does not represent any investment advice or the official views of FameEX.