Bitcoin Network Activity Plummets, Bullish Signs Emerge

Bitcoin network activity has reached a one-year low, according to data from CryptoQuant. However, certain metrics suggest that bullish moves could be on the horizon. The decline in activity is largely attributed to a decrease in the use of the Runes Protocol, a relatively new method for issuing fungible tokens directly on the Bitcoin network.

The CryptoQuant Bitcoin Network Activity Index has fallen by 15% since its record high in November 2024 and currently stands at 3,760, its lowest level since February 2024. This index is a cumulative measure of active addresses, number of transactions, block size, fees, and other Bitcoin metrics, indicating growth or a drop in Bitcoin usage.

The drop in activity is evident in the sharp decline in the number of transactions. The total daily number of transactions is currently 346,000, down 53% from its high of 734,000. Additionally, the Bitcoin mempool, which is a collection of all unconfirmed Bitcoin transactions waiting to be included in a block by miners, has plummeted from a high of 287,000 in December to just 3,000 as of Thursday, a slide of nearly 99% to levels not seen since March 2022.

CryptoQuant suggests that the lower use of the Runes Protocol may be behind the plunge in network activity. The total daily number of OP RETURN codes in Bitcoin transactions, which the Runes Protocol uses to write data about token mints and transfers on the network, has plummeted from a high of 802,000 to just 10,000.

Despite the decline in network activity, demand from long-term accumulator addresses has increased in recent weeks, which could indicate a potential rally in the BTC price. Historically, a spike in Bitcoin Permanent Holder demand has been associated with a rally in the BTC price and signals the overall perception of the asset as an investment asset or store of value. Permanent holders are addresses that accumulate BTC over time and never engage in spending transactions, indicating a long-term holding strategy that creates a lack of sell-side pressure.