- Despite BTC rising to $97,000, on-chain activity remains weak in the context of price increase.
- Six main reasons explaining why Bitcoin adoption and usage lag behind recent price growth.
While Bitcoin (BTC) has shown sustained growth on price charts in recent months, its network continues to face challenges.
Despite Bitcoin rising to $97,000, on-chain activity remains relatively low.
Key network indicators like Active Addresses and transactions do not reflect market enthusiasm.
Source: CryptoQuant
At the time of writing, Active Addresses fluctuate around 958.74K. This raises the question: Why is this happening?
According to Alphractal's analysis, Bitcoin's on-chain activity is challenging due to six main reasons.
Six Reasons Causing Bitcoin's On-Chain Activity to Stagnate
First, the current price is driven by external factors.
The Bitcoin market and value are more influenced by capital flow through Spot ETF and institutional interest, rather than actual blockchain usage. This is evidenced by continuous accumulation by MicroStrategy, Metaplanet, and BlackRock's Spot ETF.
Second, BTC's price volatility is unusually low.
After weeks of consolidation between $92,000 and $95,000, price action lacks momentum to trigger active wallet movement. Under these conditions, many holders choose to wait.
Consequently, there are fewer incentives for investors to act, leading to fewer on-chain transactions.
Third, Bitcoin is experiencing artificial Exchange Trading Volume, with some trading volumes potentially being inflated. This inflated volume creates a sense of fake activity, while actual network usage remains modest.
Source: Alphractal
Moreover, usage has shifted elsewhere.
Other networks like Ethereum (ETH), Solana (SOL), and Base are attracting DeFi, staking, and meme cryptocurrency activities. Thus, speculative usage is gradually moving to other chains with high traffic.
For instance, the Solana chain has become dominant for meme cryptocurrencies, while Ethereum focuses on staking. With usage shifting to other chains, Bitcoin is facing significant challenges.
Additionally, Bitcoin's appeal as a practical payment network has diminished.
Thus, price is increasing faster than network activity. Typically, this is difficult to sustain, and price may need to adjust to meet actual demand.
Finally, the adoption of secondary layers like Lightning Network is growing faster. With many transactions moving off the main chain, especially to Lightning, primary network activity appears to be decreasing.
This puts cryptocurrency in a challenging situation where Layer-2 sees more demand and usage. In conclusion, there's a shift occurring where BTC is treated more as a financial asset, while on-chain dynamics are happening elsewhere.
What Does This Mean for BTC?
Ultimately, price alone cannot tell the whole story. Bitcoin's strong performance on charts does not translate to increased network usage.
This change suggests that BTC is gradually being viewed as a macro financial asset – not a decentralized currency for daily use.
History shows that network growth – especially from retail users – has played a crucial role in maintaining Bitcoin's growth. But currently, with institutions dominating capital flow and retail users largely staying out, maintaining momentum may be more challenging.
If on-chain demand does not increase, BTC's price growth may face structural limitations.
