Bitcoin Active Addresses And Transaction Count Have Diverged Recently

Data shows that Bitcoin active addresses have plunged, but the transaction count has been around an all-time high (ATH). Here's why this may be so.

Bitcoin (BTC) active addresses have taken a hit recently, but the transaction count has remained high. Here's what might be causing this divergence.

Bitcoin Active Addresses And Transaction Count Have Diverged Recently

Recent activity-related metrics on the Bitcoin network have shown a divergence, as highlighted in the latest weekly report by Glassnode. The metrics in question are the Active Addresses and the Transaction Count.

The Active Addresses metric tracks the unique number of addresses that participate in some transaction activity on the blockchain daily. This metric's value is essentially analogous to the active user count for the network.

The chart below shows how the Active Addresses metric has changed in value for Bitcoin over the past decade.

The 30-day moving average (MA) of the Bitcoin Active Addresses has been sharply decreasing over the last few months, as can be seen in the graph. This would imply that fewer users are now potentially participating in network transaction activity.

However, the market momentum has been strong in this period, and as the chart shows, previous such bullish periods saw the indicator rising instead. The trend has thus deviated for this cycle.

The other metric of interest here, the Transaction Count, measures the total number of transfers taking place on the network every day. Here is a chart that shows how this metric has performed recently.

Interestingly, while the Active Addresses have seen a decline in value, the Transaction Count has shot up instead. The metric's 30-day MA value is around 612,000 per day, close to the all-time high (ATH).

The fact that the two indicators have gone opposite ways would mean that, although fewer addresses are active now, the number of transfers each address has individually been making has blown up.

Now, what's behind this trend? The analytics firm has identified a curious correlation between the Active Addresses pattern and the Transaction Count share of the Bitcoin Inscriptions.

The Inscriptions, which offer a way to inscribe data onto Satoshis (Sats), the smallest unit of BTC, had enjoyed popularity since early 2023 until recently.

The chart shows that the Transaction Count share of the Inscriptions collapsed starting mid-April, coinciding with the decline in the Active Addresses.

As for what's behind the downfall of the once incredibly popular Inscriptions, data would point towards the emergence of the Runes on the network. In short, the Runes protocol enables users to introduce fungible tokens on the network through a different mechanism from the Inscriptions.

The Runes launched around the time of the fourth Halving, which is when the Inscriptions fell off.

The Runes protocol employs address reuse, which means the same address becomes involved in multiple transactions. Thus, it's easy to see why the protocol's launch has accelerated the divergence between the Active Addresses and Transaction Count.

BTC Price

Bitcoin is currently trading at around $69,600, having lost more than 2% in the past week.