Bitcoin Transfers At ATH, But Active Users Collapse: Why?

Data shows that Bitcoin active addresses have plunged, but the transaction count has been around an all-time high (ATH). Here’s why this may be so.

Bitcoin Active Addresses And Transaction Count Have Diverged Recently

According to the latest weekly report from Glassnode, the Bitcoin network has been showing a divergence in its activity-related metrics recently. The indicators in question are the Active Addresses and the Transaction Count.

First, the Active Addresses keeps track of the unique number of addresses participating in some transaction activity on the blockchain daily. This metric’s value is essentially analogous to the active user count for the network.

The chart below shows how the Active Addresses metric has changed in value for Bitcoin over the past decade.

The value of the metric appears to have plunged in recent weeks | Source: Glassnode’s The Week Onchain – Week 24, 2024

As is visible in the graph, the 30-day moving average (MA) of the Bitcoin Active Addresses has been sharply going down over the last few months. This would imply that fewer users are now potentially participating in network transaction activity.

The market momentum has been strong in this period, however, and as is visible in the chart, previous such bullish periods saw the indicator rising instead. Thus, the trend has deviated for this cycle.

The other metric of interest here, the Transaction Count, measures the total number of transfers taking place on the network every day. Here is a chart that shows how this metric has performed recently:

Looks like the value of the indicator has been on the rise recently | Source: Glassnode’s The Week Onchain – Week 24, 2024

Interestingly, while the Active Addresses have seen a decline in value, the Transaction Count has shot up instead. The metric’s 30-day MA value is around 612,000 per day, near the ATH.

The fact that the two indicators have gone opposite ways would mean that, although fewer addresses are active now, the number of transfers each address has individually been making has blown up.

Now, what’s behind this trend? The analytics firm has identified a curious correlation between the Active Addresses pattern and the Transaction Count share of the Bitcoin Inscriptions.

The Inscriptions, which provide a way to inscribe data onto Satoshis (Sats), the smallest unit of BTC, had enjoyed popularity since early 2023 until recently.

The data for the Transaction Count of the Inscriptions since their inception | Source: Glassnode’s The Week Onchain – Week 24, 2024

The chart shows that the Transaction Count share of the Inscriptions collapsed starting mid-April, matching the decline in the Active Addresses.

As for what’s behind the downfall of the once incredibly popular Inscriptions, data would point towards the emergence of the Runes on the network. In short, the Runes protocol allows users to introduce fungible tokens on the network through a different mechanism from the Inscriptions.

The Runes launched alongside the fourth Halving, which is around when the Inscriptions fell off.

The Transaction Counts for Runes and all other types of transactions | Source: Glassnode’s The Week Onchain – Week 24, 2024

The Runes protocol uses address reuse, which means the same address becomes involved in multiple transactions. Thus, it’s easy to see why the protocol’s launch has accelerated the divergence between the Active Addresses and Transaction Count.