Bitcoin (BTC) Network Activity Index Drops to 1-Year Low, But Long-Term Holder Accumulation Suggests Price Growth Ahead

One bitcoin (BTC) holder metric is pointing to price growth in the months ahead even as activity on the blockchain falls to its lowest in a year, a CryptoQuant analysis noted this week.

A key metric for bitcoin BTCUSD price performance is signaling gains in the coming months despite blockchain activity falling to a one-year low, a CryptoQuant analysis showed this week.

The firm’s Bitcoin Network Activity Index has declined by 15% since a record high in November 2024, reaching 3,760 as of Friday morning, which is its lowest level since February 2024. The index aggregates several bitcoin metrics, including active addresses, transaction count, block size and fees, to indicate an expansion or contraction in Bitcoin usage.

A sharp drop in transaction count led to the lower activity reading. The total daily transaction count was 346,000 as of Friday, down 53% from a high of 734,000.

The low network activity is also seen in the Bitcoin mempool, which is a collection of all unconfirmed bitcoin transactions awaiting inclusion in a block by miners. Mempool volumes crashed from a high of 287,000 in December to just 3,000 as of Thursday, a decline of nearly 99% to levels last seen in March 2022.

According to CryptoQuant, the plunge may be due to a decreased utilization of Runes Protocol, a relatively new method for issuing fungible tokens directly on Bitcoin.

“The decline in Bitcoin’s network activity can be largely attributed to a collapse in the use of the RUNES protocol to mint tokens on the Bitcoin network,” it noted. “This is reflected in the total daily number of OP RETURN codes in Bitcoin transactions, which the RUNES protocol uses to write data on the network regarding token mints and transfers.”

“When the RUNES protocol emerged in April 2024, daily OP RETURN codes spiked to 802K. However, since then, the number of OP RETURN codes has plummeted, with only 10K used,” the firm added.

Still, the drop in activity may not have a direct impact on bitcoin prices, which are seen as likely to rise due to increased demand from long-term accumulator addresses in recent weeks.

Such a spike has been historically linked to a rally in the BTC price and indicates the overall perception of the cryptocurrency as an investment asset or store of value. Permanent holders are addresses that continuously add to their BTC holdings and never engage in spending transactions, which suggests a long-term holding strategy that creates a lack of sell-side pressure.