Bitcoin’s network activity has plummeted to its lowest level in a year, marking a significant shift in the flagship cryptocurrency’s performance. CryptoQuant, a leading data analytics firm, estimates that this downturn pegs Bitcoin’s fair value in the range of $48,000 to $95,000. At press time, Bitcoin was exchanging hands at approximately $96,500, indicating it may be overvalued based on network activity.
The Bitcoin Network Activity Index, a measure of the transactional volume on the network, has experienced a 15% drop since its peak in November 2024, now sitting at 3,760. This is the lowest the index has been since February 2024. The decrease is largely attributed to a decline in transactions, with the total daily transaction count currently at 346,000. This is a 53% drop from the all-time high of 734,000 transactions recorded in September 2024.
A significant contributor to this downturn is the reduced use of the Runes protocol for token minting on Bitcoin’s blockchain. Runes employs OP_RETURN codes to store data related to tokens. However, the usage of these codes has seen a significant dip. In April 2024, daily OP_RETURN codes hit 802,000, but as of January, the average has dwindled to a mere 10,000 per day.
Data from Dune Analytics shows that as of February 4th, Runes-related transactions amounted to 6,110, accounting for just about 2.5% of Bitcoin’s daily transaction volume. From January 1st to February 4th, Bitcoin transfers comprised a significant 73.5% of the daily network activity, outpacing transactions related to Ordinals, BRC-20 tokens, and Runes.
This decline is also reflected in Bitcoin’s mempool, where unconfirmed transactions have nosedived from 287,000 in December 2024 to a mere 3,000, a 99% drop. The mempool last noted such low activity levels in March 2022.
Despite these indicators suggesting an overvaluation of Bitcoin, Bitfinex recently released a report stating that Bitcoin remains robust, even in the wake of market shocks like President Donald Trump’s tariff plan. In January, Bitcoin outperformed the broader cryptocurrency market with a gain of 9.4%, while the wider market experienced an average decline of 25.7%.
Although Bitcoin’s network activity may appear concerning, it’s crucial to remember that the cryptocurrency market is highly volatile and influenced by a myriad of factors. As always, investors are encouraged to do thorough research and exercise caution when trading.
