Data shows that Bitcoin’s active addresses have plummeted despite high demand for transactions; here’s why this can happen.
Bitcoin Active addresses have taken a sharp dive recently
This is according to the latest weekly report of Glasnode, the active addresses are around cyclical lows of 566,000. The “active addresses” metric measures the daily number of unique Bitcoin addresses participating in certain transaction activities on the blockchain.
‘Unique’ here means that the indicator only checks whether an address has been involved in a move at least once. This means that regardless of the number of transactions an address can perform, the contribution to the statistic of active addresses remains only one unit.
This limitation exists because the number of unique addresses can serve as an analog to the number of unique users visiting the blockchain, thus providing an estimate for the daily users on the network.
Another indicator created for tracking activity on the Bitcoin blockchain is the “transaction count,” which, as the name suggests, tells us about the daily total number of transfers taking place on the network.
Of course, when this metric has a high value, it means that many transactions are taking place on the blockchain. Such indicator values imply high demand for the use of the network at the moment, but the metric cannot say anything about how the activity is distributed; that’s where the active address indicator comes in.
Now, here’s a chart showing the trend in the number of Bitcoin transactions (as well as the 30-day and 365-day simple moving averages) over the asset’s entire history:
The value of the metric seems to have sharply surged recently | Source: Glassnode's The Week Onchain - Week 20, 2023
As shown in the chart above, the number of Bitcoin transactions has been rising rapidly recently, reaching a new record of approximately 682,000 daily transfers.
The reason behind this explosion in the number of transactions is the rise of the BRC-20 tokens, fungible tokens created on the BTC blockchain using the Ordinals protocol (a way of transferring data such as text and images directly into the chain). subscribe).
These BRC-20 tokens have started a new memecoin mania, with PEPE being the biggest example of such a coin. The insanely fast popularity of these tokens has meant that the demand for transactions on the network is higher than ever before.
However, what about the active addresses? Does this indicator also see an increase?
Looks like the metric has plunged recently | Source: Glassnode's The Week Onchain - Week 20, 2023
The graph shows that the active addresses first saw an increase, but then fell to a value of 566,000 addresses per day, around the current cyclical low.
This would mean that while the demand for making transactions is super high right now, the demand is not really coming from a large number of users, but from a fairly small number of them who are constantly making repeated transfers.
“This is a curious scenario, where many BRC-20 users seem to have reused their Bitcoin addresses,” explains Glassnode. “Perhaps because we are more familiar with how account-based chains like Ethereum or Solana work, and less so with the Bitcoin UTXO system.”
BTC price
At the time of writing, Bitcoin is trading around $27,400, down 1% over the past week.
BTC has shot up over the last 24 hours | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com