Bitcoin's On-Chain Activity Falls Short of Bull Run Peak

The Bitcoin total transfer volume has reached a peak of $118 billion in the current bull run, significantly lower than the $740 billion high observed during the 2021 market peak despite comparable price levels. This difference may be attributed to the increased use of Bitcoin spot exchange-traded funds (ETFs), introducing new investors who hold their coins off-chain and do not actively engage in on-chain transactions.

Bitcoin's On-Chain Activity Lags Behind 2021 Bull Run Peak

Despite Bitcoin (BTC) reaching a new all-time high price recently, on-chain data reveals a stark contrast in the network's transfer volume compared to the 2021 bull run peak.

According to CryptoQuant analyst Axel Adler Jr., Bitcoin's total transfer volume has only reached a high of $118 billion in the current bull run, a mere fraction of the $740 billion all-time high (ATH) set in November 2021.

The total transfer volume measures the total amount of BTC involved in transactions on the network daily, providing insights into the level of activity and demand. Historically, this metric has surged during bull markets, reflecting increased trading activity and network usage.

"This means that, at that point, the blockchain was processing the movement of capital worth $740 billion per day," Adler Jr. explains. "This peak is still the all-time high (ATH) for the metric."

However, despite BTC setting a new price ATH in its latest rally, the corresponding transfer volume has fallen significantly short. This indicates a notable divergence from previous bull runs, where volume typically surged alongside price increases.

"Why, then, is the current bull run different in this pattern?" Adler Jr. questions.

One potential explanation lies in the emergence of Bitcoin spot exchange-traded funds (ETFs), which have gained popularity among investors seeking indirect exposure to the cryptocurrency. Spot ETFs purchase and hold BTC, allowing their users to access the asset through a familiar and regulated platform.

While spot ETFs have undoubtedly brought significant demand to Bitcoin, their impact on on-chain activity is different from that of active crypto users who directly participate in the network. "The fresh demand through the spot ETFs is all 'off-chain,' so to speak, as the ones holding their coins are the funds themselves," Adler Jr. notes.

This off-chain demand does not directly translate into increased on-chain transfer volume, as the ETFs act as intermediaries between investors and the network. As a result, while spot ETFs have boosted BTC's overall market demand, they have not had a proportional impact on the network's activity.

BTC's price has experienced some volatility in recent days, recovering above $69,000 yesterday before retracing to around $66,600. Despite the high price levels, the subdued on-chain transfer volume suggests a divergence between price action and network activity.

Overall, the contrast between Bitcoin's current bull run and the 2021 peak in terms of total transfer volume highlights the different dynamics at play in the market. While spot ETFs have introduced new investors, their off-chain nature has moderated the impact on network activity, leading to a divergence in the relationship between price and volume.