Bitcoin Active Addresses Sharply Decline Despite Transaction Demand, Why?

Keshav Verma

1 year ago

3 mins read

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Data shows that Bitcoin active addresses have sharply dropped despite the high transaction demand; here’s why this may be happening.

Bitcoin Active Addresses Have Seen A Sharp Plunge Recently

According to the latest weekly report from Glassnode, the active addresses are around cyclical lows of 566,000. The “active addresses” metric measures the daily number of unique Bitcoin addresses participating in some transaction activity on the blockchain.

By “unique,” what’s meant here is that the indicator only checks whether an address has been involved in a transfer at least once. This implies that regardless of how many transactions an address might make, its contribution to the active addresses metric will remain just one unit.

This restriction 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 that’s made for tracking activity on the Bitcoin blockchain is the “transaction count,” which, as its name already suggests, tells us about the daily total number of transfers taking place on the network.

When this metric has a high value, it naturally means that many transactions occur on the blockchain. Such indicator values imply a high demand for using the network currently, but the metric can’t say anything about how the activity is distributed; that’s where the active addresses indicator comes in.

Now, here is a chart that shows the trend in the Bitcoin transaction count (as well as its 30-day and 365-day simple moving averages) over the entire history of the asset:

The value of the metric seems to have sharply surged recently | Source: Glassnode's The Week Onchain - Week 20, 2023

As displayed in the above graph, the Bitcoin transaction count has recently seen a rapid rise and has hit a new all-time high of about 682,000 daily transfers.

The reason behind this explosion in the transaction count is the emergence of the BRC-20 tokens, fungible tokens created on the BTC blockchain using the Ordinals protocol (a way to inscribe data like text and images directly into the chain).

These BRC-20 tokens have started a new memecoin mania, with PEPE being the largest example of such a coin. The insanely fast popularity of these tokens has meant that the demand for transacting on the network is more than ever before.

What about the active addresses, though? Is this indicator also seeing a rise?

Looks like the metric has plunged recently | Source: Glassnode's The Week Onchain - Week 20, 2023

From the chart, it’s apparent that the active addresses observed a rise at first, but then it plunged 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 isn’t actually coming from a large number of users but a rather small number of them who are constantly making repeat transfers.

“This is a curious scenario, whereby many BRC-20 users appear to have re-used their Bitcoin addresses,” explains Glassnode. “Perhaps due to having more familiarity with how account-based chains like Ethereum or Solana operate, and less so with the Bitcoin UTXO system.”

BTC Price

At the time of writing, Bitcoin is trading around $27,400, down 1% in the last week.

BTC has shot up over the last 24 hours | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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