The recent CryptoQuant Network Activity Index for Bitcoin reflects a significant drop in the digital currency’s activity; the index has plummeted by 15%, marking its weakest performance since February 2024. With a current index standing at 3,760, the activity is at its lowest in over a year, indicating a notable downturn in the Bitcoin market.
The main contributor to this drastic decrease appears to be a sharp decline in Bitcoin transactions. Historically, daily transactions peaked in September 2024, at an impressive 734,000. However, in stark contrast, this figure now stands at a mere 346,000 transactions per day, representing a steep 53% drop.
This decline in activity can be attributed in part to the reduced usage of the RUNES protocol. Since its inception in April 2024, the protocol had been instrumental in driving Bitcoin activity, particularly in minting and moving tokens via OP RETURN codes. In fact, daily OP RETURN usage had skyrocketed to 802,000. Unfortunately, this number has now taken a nosedive to a meagre 10,000, indicating a significant drop in token-driven operations on the Bitcoin network.
The Bitcoin mempool, which is responsible for tracking unconfirmed transactions pending addition to the blockchain, also confirms the network slowdown. The mempool currently holds only 3k transactions, a stark decrease from the 287k transactions recorded in December 2024 – a shocking 99% reduction. With figures reaching their lowest since March 2022, it is evident that the overall network usage has seen a significant downturn.
Given the current low network usage, Bitcoin’s market price of $99,000 could be perceived as inflated. This slowdown suggests that the cryptocurrency might be overvalued, as its activity levels no longer align with its current market price. In line with this, the Metcalfe Valuation Bands indicate a fair value between $48,000 and $95,000. Therefore, based on activity-based value, Bitcoin’s price indeed appears to be inflated.
The reduced network activity could indicate a period of transition for the token – a response to the decreasing interest in protocols such as RUNES. This network activity, or lack thereof, serves as a vital indicator of Bitcoin’s underlying strength. Consequently, this trend is likely to be closely monitored by investors, serving as a crucial determinant in future investment decisions. This news comes as a reminder of the volatile nature of cryptocurrencies, where market trends can shift dramatically in a short period.
