On-chain data reveal a significant decline in Bitcoin (BTC) network activity, reaching a new one-year low. Daily transactions have dropped from an all-time high of 734,000 in September 2024 to 346,000, representing a 53% drop.
The CryptoQuant Bitcoin Network Activity Index now stands at 3,760, the lowest it has been since February 2024.
According to the index, overall Bitcoin network activity has declined by 15% since it peaked in November 2024, and its current level at 3760 is the lowest it has been in a year. Daily transactions have also more than halved, a decline that could signal a potential weakness in the cryptocurrency’s fundamentals.
BTC sees decline in transaction
At its height, the Bitcoin network recorded over 734,000 daily transactions. However, as of today, February 5, 2025, it recorded a record low of just 346,000, an over 53% drop.
This decline is not occurring in a vacuum. The leading cryptocurrency is feeling the effects of macroeconomic forces, chief among them the economic policies of U.S. President Donald Trump and the fading hype around the Runes protocol.
The introduction of tariffs by the Trump presidency on Canada, Mexico, and China, sent shockwaves throughout the global financial markets, causing stocks and cryptos to fall. BTC lost about 7.5% in a day, falling to $91,969. Tariffs and trade restrictions often lead to people seeking asset classes viewed as safe and less volatile, such as the U.S. dollar. They also avoid more volatile assets like BTC, which leads them to lose value.
The Runes protocol was introduced in April 2024. It facilitated the creation and trading of fungible tokens on the Bitcoin network, which caused a spike in transactions on the network. At its peak, Rune protocol saw over 800,000 transactions daily. However, on-chain data shows this has declined to about 10,000 daily, a dramatic decline of 98%, which shows that interest in the protocol has also waned.
Another indicator of declining Bitcoin network activity is the near-empty mempool, a backlog of unconfirmed transactions on the blockchain. According to CryptoQuant, the mempool had an average of 287,000 unconfirmed transactions at the end of 2024. However, that number is now 3,000, an alarming 99% drop.
It should also be noted that the last time the mempool was this empty was in March 2022, during the crypto winter.
Bitcoin price vs network activity: A crypto winter in the making?
BTC has been caught in a declining trend, with on-chain activities going from 11-month lows to setting the unwanted record of hitting 12-month depths.
According to CryptoQuant, BTC is currently overvalued on the Metcalfe Valuation Bands valuation model, which estimates that the value of BTC should be between the $48,000 and $95,000 ranges. This, combined with decreased network activity similar to levels seen in the crypto winter of 2022, indicates that Bitcoin may be due for a correction.
While the Trump-imposed tariffs might have hit BTC, it should also be noted that tariffs are inflationary. BTC has historically been viewed as a hedge against inflation, which could translate to more demand and value for BTC in the long run.
Also, given that BTC is a non-sovereign asset outside government control, investors might opt for it where there’s prolonged economic uncertainty, an area where it thrives.
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