Why does the trading volume of BTC increase but the price does not?

Although U.S. ETF products have brought staggering 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.

Abstract

• With the emergence of Runes protocol, the number of active trading addresses in the market has decreased, but the trading volume has increased instead. This difference between increase and decrease creates an obvious and counterintuitive divergence.
• Currently, the amount of assets held by major entities of concern in the market now reaches a staggering approximately 4.23 million BTC. This amount accounts for more than 27% of the supply in the adjusted market, and the US spot The ETF now holds total assets of approximately 862,000 BTC.
• Spot and arbitrage trading structures should currently be an important source of ETF inflow demand. Currently, these ETF products are used by investors as a tool to obtain long spot exposure, but from the situation in the futures market of the Chicago Mercantile Exchange It seems that the net short position of Bitcoin futures is becoming larger and larger.

Divergence of On-Chain Activity Metrics

On-chain activity metrics such as active addresses, transactions, and transaction volume provide valuable insights into the performance and growth of blockchain networks. Effective toolset. 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, albeit driven by completely different factors. 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.

<img src="https://img.php.cn/upload/article/000/000/000/171835877194678.png" alt="Why does the trading volume of BTC increase but the price does not?">图一：比特币活跃地址态势

Although the market momentum is strong and the active addresses and daily transaction volume we can observe seem to be increasing every day, the trend is deviating from the original upward path.

In contrast, although the total number of active addresses seems to be decreasing, the transaction volume processed by the entire Bitcoin network is close to a record 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.

图二：比特币交易笔数态势

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.

<img src="https://img.php.cn/upload/article/000/000/000/171835877983346.png" alt="Why does the trading volume of BTC increase but the price does not?">图三：比特币铭文交易笔数（14日均线）

To illustrate how the inscription industry segment has grown since the beginning of 2023, we can look back at how the cumulative total number of inscriptions has expanded to illustrate this issue. As of this writing, the number of inscriptions has reached 71 million, however, the popularity of the protocol has begun to decline significantly since mid-April of this year.

<img src="https://img.php.cn/upload/article/000/000/000/171835878332818.png" alt="Why does the trading volume of BTC increase but the price does not?">图四：比特币铭文总交易笔数

Among the various reasons that may have contributed to the decline in Inscription-related transaction activity, we believe that the emergence of the Runes protocol, which claims to be a way to introduce others to Bitcoin, is an important reason for this situation. A more efficient way to homogenize tokens. The Runes protocol was launched at the halving block, which explains why the decline in inscription-related transactions also occurred in mid-April.

The Runes protocol follows a completely different mechanism from Inscription and BRC-20 tokens. It uses the OP_RETURN field with a length of only 80 bytes to achieve its functions. This feature allows the protocol to encode arbitrary data into the chain, while the network space occupied by this encoding process is greatly reduced compared to the previous two protocols.

As the Runes protocol went live at the time of the fourth halving (April 20, 2024), the market demand for Runes transactions surged to between 600,000 and 800,000 per day, and the demand has remained constant since then. high position.

<img src="https://img.php.cn/upload/article/000/000/000/171835878751793.png" alt="Why does the trading volume of BTC increase but the price does not?">图五：比特币每日交易数量及类型

At present, Runes-related transactions have basically replaced BRC-20 tokens, Ordinals and Inscriptions, accounting for 57.2% of daily transactions. This suggests that collector speculation may have shifted from Bitcoin Inscription to the Runes market.

<img src="https://img.php.cn/upload/article/000/000/000/171835879084655.png" alt="Why does the trading volume of BTC increase but the price does not?">图六：比特币每日交易数量及类型（百分比）

The huge divergence in ETF demand

Recently, there is another ETF-related divergence that has also attracted widespread attention in the market-despite the steady flow of U.S. spot ETF products. Money is flowing in, but prices remain stagnant and sideways. To determine and assess the impact the demand side of ETFs are having in the market, we can compare the ETF asset volume (862,000 BTC) to the amount of Bitcoin assets held by other major entities of concern:

• US spot ETF: 862,000 BTC
• Mt.Gox trustee: 141,000 BTC
• US government holdings: 207,000 BTC
• All transactions Total platform assets: 2.3 million BTC
• Miners (excluding Patoshi): 706,000 BTC

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