CryptoQuant, a leading data analytics firm, estimates that this downturn pegs Bitcoin's fair value in the range of $48,000 to $95,000.
Bitcoin's network activity has hit its lowest in a year, signaling a crucial shift in the flagship cryptocurrency's performance. According to CryptoQuant, a leading data analytics firm, this downturn pegs Bitcoin's fair value in the range of $48,000 to $95,000. At press time, Bitcoin was trading at around $96,500, suggesting it may be overvalued based on network activity.
The Bitcoin Network Activity Index, which measures the transactional volume on the network, has seen a 15% drop since peaking at 3,760 in November 2024. This marks the lowest the index has been since February 2024. The decrease is mainly attributed to a decline in transactions, with the total daily transaction count currently at 346,000. This is a 53% drop from the all-time high of 734,000 transactions recorded in September 2024.
One key factor contributing to this downturn is the reduced usage of the Runes protocol for token minting on Bitcoin's blockchain. Runes utilizes OP_RETURN codes to store data related to tokens, but the use of these codes has seen a significant dip.
In April 2024, daily OP_RETURN codes hit 802,000, but as of January, the average has dwindled to a mere 10,000 per day. Data from Dune Analytics shows that as of February 4th, Runes-related transactions amounted to 6,110, accounting for just about 2.5% of Bitcoin’s daily transaction volume.
From January 1st to February 4th, Bitcoin transfers comprised a significant 73.5% of the daily network activity, outpacing transactions related to Ordinals, BRC-20 tokens, and Runes. This decline is also reflected in Bitcoin's mempool, where unconfirmed transactions have nosedived from 287,000 in December 2024 to a mere 3,000, a 99% drop. The mempool last noted such low activity levels in March 2022.
While these indicators may suggest an overvaluation of Bitcoin, a recent report by Bitfinex highlights that Bitcoin has remained resilient, even amidst market shocks like President Donald Trump's tariff plan. In January, Bitcoin outperformed the broader cryptocurrency market with a gain of 9.4%, while the wider market experienced an average decline of 25.7%.
As always, investors are encouraged to do thorough research and exercise caution when trading, given the highly volatile nature of the cryptocurrency market, which is influenced by a multitude of factors.
