Why does the transaction volume of the big pie increase but the price does not increase?

Although U.S. ETF products have brought an astonishing amount of capital inflows to the market, the market's spontaneous spot self-holding transactions seem to be suppressing buyer pressure, which makes the current market need more non-arbitrage demand to further stimulate prices. In addition to focusing on this point, we will continue to explore the divergence between the two seemingly contradictory facts of the decrease in active addresses and the increase in the number of transactions.

On-chain activity metrics such as active addresses, transactions, and transaction volume provide a valuable and effective toolset for analyzing the performance and growth of a blockchain network. When the country implemented restrictions on Bitcoin Mining in mid-2021, the number of active addresses on the Bitcoin network dropped dramatically, plummeting from more than about 1.1 million per day to only about 800,000 per day.

The Bitcoin network is currently experiencing a similar decline in network activity, although the drivers are entirely different. Below, we explore how the emergence of Inscription, Ordinals, BRC-20, and the Runes protocol have significantly changed on-chain analysts’ views and predictions of future activity indicators.

Although the market has strong momentum, and the number of active addresses and daily transaction volume we can observe seems to be increasing every day, the trend is deviating from the original upward path. In contrast, although the total number of active addresses appears to be decreasing, the transaction volume processed by the entire Bitcoin network is close to an all-time high. The current average monthly transaction volume is 617,000 BTC/day, which is 31% higher than the annual average, indicating that the market still has a fairly high demand for Bitcoin block space.

If we compare the recent drop in active addresses with Inscription as well as the transaction share of BRC-20 tokens, we can observe a strong correlation. It is worth noting that the number of inscriptions has also dropped sharply since mid-April.

This suggests that the initial driver of the drop in address activity was primarily due to reduced usage of Inscriptions and Ordinals. It is worth noting that many wallets and protocols in the industry reuse an address, and if an address is active more than once in a day, it will not be counted twice. So if an address generates ten transactions a day, it will only show up as transactions from one active address, rather than as ten separate transactions.