The crypto market is recovering from lower prices at the start of the month, but the daily number of Bitcoin transactions continues to decline. This data anomaly reflects the changes taking place in the way the flagship cryptocurrency is being used. This may reflect a larger trend in the future.
MORE HODLING, LESS TRADE
Daily transaction activity started to grow steadily at the start of this year, which coincided with the increase in the price of Bitcoin. Both trading and mining resumed, adding to that number. However, the number of transactions changed abruptly at the start of the month as the price collapsed and the global economy plummeted.
Earlier this year, the total daily trades repeatedly eclipsed 350K. Now it is around 275,000 a day and falling.
Several factors contributed to this decline. Falling prices have led to a decrease in mining activity, as evidenced by a noticeable drop in network hashing power over the past few days. Most notably, the owners of Bitcoin have removed thousands of coins from the exchanges, leading to a decrease in trading activity.
The main takeaway from these measures is that Bitcoin investors are now more interested in keeping their funds safe in personal wallets than on exchanges. Cold storage means less network activity, which can be seen in the data. In support of this notion, the number of Bitcoin wallets continues to grow steadily, as does the diversity. There are currently over 100,000 more active addresses than at the start of the month.
LESS TRANSACTIONS REVEAL THAT BITCOIN IS A SECURITY JOURNAL
Ironically, the decline in network activity demonstrates that Bitcoin is healthy and secure. Investors who move their coins into self-checking wallets indicate that cryptocurrency is viewed as a safe haven during this time of global economic crisis.
In addition, this action helps to increase the value of Bitcoin by reducing the available supply used for trading. In fact, Bitcoin advocates should care more about too many daily transactions than too few. Currently, the network can only process about 600,000 transactions per day without fees and congestion becoming an issue. Until the Lightning Network, or some other scaling solution, becomes more user-friendly, the problem of too much activity is very real.
Bitcoin transaction numbers will likely pick up as the market recovers. Nonetheless, for now, this data indicates that the cryptocurrency is working exactly as expected.
Do you think the decline in Bitcoin activity is a bearish or a bullish signal? Add your thoughts below!
Images via Shutterstock, graphic by Blockchain.com