Understanding the Current State of Bitcoin Activity
Recent analysis from CryptoQuant reveals that despite Bitcoin’s (BTC) network activity hitting a yearly low, certain metrics are hinting at possible price increases in the near future. The Bitcoin Network Activity Index, which measures various aspects of Bitcoin usage, has declined significantly, indicating reduced blockchain interaction among users.
Declining Metrics: A Closer Look
As of Friday morning, the Bitcoin Network Activity Index stood at 3,760, a 15% drop from the all-time high recorded in November 2024. This is the lowest level observed since February 2024. The index aggregates several factors, including active addresses, transaction counts, block sizes, and fees, providing a comprehensive view of Bitcoin’s current usage trends.
One of the most notable indicators of this decline is the sharp drop in daily transactions. Currently, the total number of transactions has fallen to 346,000, which is a staggering 53% decrease from the high of 734,000 transactions.
Mempool Volumes Highlight Reduced Activity
Another sign of declining activity is visible in the Bitcoin mempool, which stores all unconfirmed transactions waiting for miners to include them in a block. The mempool volume has seen a dramatic fall, plunging from 287,000 in December to just 3,000 as of Thursday—an almost 99% decrease, marking levels not seen since March 2022.
The Decline of the Runes Protocol
CryptoQuant attributes a significant part of this downturn to the diminishing use of the Runes Protocol, a newer method for issuing fungible tokens directly on the Bitcoin network. The firm noted, “The decline in Bitcoin’s network activity can be mostly explained by the collapse in the use of the RUNES protocol to mint tokens on the Bitcoin network.”
This observation is backed by the drastic reduction in the number of OP RETURN codes, which are used in Bitcoin transactions to indicate data related to token mints and transfers. After spiking to 802,000 in April 2024 following the protocol’s emergence, the usage of OP RETURN codes has now dropped to a mere 10,000.
Positive Outlook Amidst Low Activity
Despite these declines, the decrease in network activity may not necessarily translate to lower Bitcoin prices. In fact, a noteworthy uptick in demand from long-term holders—addresses that accumulate Bitcoin without engaging in spending transactions—has been observed in recent weeks.
Historically, such an increase in long-term accumulator addresses is associated with rising BTC prices, indicating a strengthening perception of Bitcoin as a valuable investment and a reliable store of value. This trend suggests that while short-term activity may be waning, the underlying demand from committed holders could create a foundation for future price growth.
