Data shows that Bitcoin active addresses have fallen, but the number of transactions is near an all-time high (ATH). Here’s why this may be the case.
Bitcoin active addresses and transaction counts have recently diverged
According to the latest weekly report from Glass knot, the Bitcoin network has recently shown divergence in its activity-related metrics. The indicators in question are active addresses and the number of transactions.
Firstly the Active addresses keeps daily track of the unique number of addresses participating in certain transaction activities on the blockchain. The value of this metric is essentially analogous to the number of active users for the network.
The chart below shows how the Active Addresses metric has changed in value for Bitcoin over the past decade.
The value of the metric appears to have plunged in recent weeks | Source: Glassnode's The Week Onchain - Week 24, 2024
As the chart shows, the 30-day moving average (MA) of active Bitcoin addresses has declined sharply over the past few months. This would imply that fewer users are now potentially participating in the network’s transaction activities.
However, market momentum has been strong during this period and, as the chart shows, such previous bullish periods have seen the indicator rise. So, the trend has deviated for this cycle.
The other interesting measure here, the Number of transactions, measures the total number of transfers occurring daily on the network. Here is a chart that shows the recent performance of this metric:
Looks like the value of the indicator has been on the rise recently | Source: Glassnode's The Week Onchain - Week 24, 2024
Interestingly, even though the value of active addresses has decreased, the number of transactions has instead increased. The metric’s 30-day MA value is around 612,000 per day, close to the ATH.
The fact that the two indicators have moved in opposite directions would mean that, even though fewer addresses are active now, the number of transfers made by each address individually has exploded.
But what is behind this trend? The analytics firm identified a curious correlation between the pattern of active addresses and Bitcoin’s share of transaction counts. Inscriptions.
Listings, which allow data to be recorded on Satoshis (Sats), the smallest unit of BTC, enjoyed popularity since early 2023 until recently.
The data for the Transaction Count of the Inscriptions since their inception | Source: Glassnode's The Week Onchain - Week 24, 2024
The chart shows that the share of number of transactions in registrations collapsed from mid-April, corresponding to the decline in active addresses.
As for what’s behind the drop in once incredibly popular listings, the data would point to the emergence of Runes on the network. In short, the Runes protocol allows users to introduce fungible tokens to the network via a different mechanism than Registrations.
The Runes were cast alongside the fourth halving, which is around the time the inscriptions disappeared.
The Transaction Counts for Runes and all other types of transactions | Source: Glassnode's The Week Onchain - Week 24, 2024
The Runes protocol uses address reuse, which means that the same address is involved in multiple transactions. Thus, it is easy to understand why the launch of the protocol accelerated the divergence between active addresses and the number of transactions.
BTC Price
At the time of writing, Bitcoin is trading at around $69,600, down more than 2% over the past week.
The price of the asset has risen during the past day | Source: BTCUSD on TradingView
Featured image of Dall-E, Glassnode.com, chart from TradingView.com
