Bitcoin Network Activity Drops 15%, Hitting Its Lowest Level in a Year

Bitcoin network activity has fallen by 15% since its November 2024 peak, reaching its lowest level since February 2024. A 53% drop in daily transactions and the decline of the RUNES protocol have contributed to this slowdown. Analysts suggest Bitcoin is overvalued at $99K, with fair value estimates ranging between $48K and $95K based on network activity.

Bitcoin Network Faces Declining Activity, Raising Valuation Concerns

Bitcoin’s network activity has sharply declined, signaling a potential shift in investor engagement and transaction demand. According to CryptoQuant’s latest research, the Bitcoin Network Activity Index has dropped 15% since reaching a record high in November 2024, now sitting at 3,760—its lowest point in the past year.

The decline is primarily driven by a steep drop in Bitcoin transactions, which have fallen 53% from their September 2024 peak of 734,000 daily transactions to just 346,000 today. This decrease is causing concerns about Bitcoin’s fair value, with current price estimates suggesting it may be overvalued at $99,000.

RUNES Protocol Collapse Contributes to Bitcoin’s Network Slowdown

A key factor behind this downturn is the collapse of the RUNES protocol, which previously played a significant role in driving Bitcoin’s transaction volume. The protocol, introduced in April 2024, allowed users to mint tokens directly on Bitcoin’s blockchain using OP_RETURN codes—a mechanism for embedding additional data into Bitcoin transactions.

At its peak, RUNES activity surged to 802,000 OP_RETURN codes recorded within transactions. However, as of today, only 10,000 OP_RETURN codes are being used, marking a dramatic decline in protocol adoption.

The impact of this shift is reflected in Bitcoin’s mempool, which serves as a queue for unconfirmed transactions. The number of pending transactions has plummeted 99%, from 287,000 in December 2024 to just 3,000 today—the lowest since March 2022.

This drastic reduction in network congestion suggests that Bitcoin’s usage is dwindling, further reinforcing the idea that the asset is currently overvalued relative to its actual transaction activity.

Bitcoin’s Fair Value: Is a Correction Coming?

With Bitcoin trading around $99,000, analysts at CryptoQuant have compared its market price to its Metcalfe Valuation Bands, a model that evaluates Bitcoin’s fair value based on network activity.

According to this framework:

• Bitcoin’s fair value currently falls between $48,000 and $95,000.
• If network activity does not recover, Bitcoin may face further downside pressure.
• Historically, similar drops in network engagement have led to price corrections, particularly when activity levels remain low for extended periods.

However, analysts note that external factors such as ETF inflows, macroeconomic conditions, and institutional adoption could still influence Bitcoin’s price, preventing a deeper retracement

FAQ: Understanding Bitcoin’s Network Slowdown

What is CryptoQuant’s Bitcoin Network Activity Index?

The Bitcoin Network Activity Index is a metric that tracks overall engagement on the Bitcoin blockchain. It incorporates transaction volume, active addresses, and mempool congestion to determine how frequently Bitcoin is being used. A decline in this index suggests reduced on-chain activity and demand.

How does the mempool reflect Bitcoin’s network health?

The mempool is where unconfirmed transactions wait before being added to a block. When the mempool is full, it indicates high demand for Bitcoin transactions, often leading to higher transaction fees and longer wait times. Conversely, when the mempool is empty or near empty, it suggests low demand, as fewer transactions are being processed.

What does Bitcoin’s fair value range of $48K-$95K mean?

The Metcalfe Valuation Bands estimate Bitcoin’s fair value by analyzing network activity. When usage is high, Bitcoin’s price generally aligns within these valuation bands. If activity continues to decline, Bitcoin’s price may revert toward the lower end of its fair value range.

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