Bitcoin network activity fades as ETF and macro trends dominate

Bitcoin’s network activity has been weakening for six straight months, but the decline is not showing up in the headline metric many traders watch first.

The clearer signal is not transaction volume, which has held up, but participation breadth. Fewer unique addresses are active on the chain, even as the network continues to process a similar number of transactions.

In a market where price discovery is increasingly happening through exchange-traded funds and derivatives, that split matters. It suggests Bitcoin’s on-chain footprint is narrowing even while market exposure remains active elsewhere.

The trend has become harder to ignore as the bear market has dragged on.

Glassnode data shows Bitcoin active addresses at about 778,680 on an eight-day average in mid-August 2025. As of Feb. 23, that figure had fallen to about 535,942, a drop of roughly 31%.

CryptoQuant has also flagged low network activity for six consecutive months, describing the current stretch as an extended period of weakness in on-chain participation.

The last time the market saw a similar pattern was in 2024, when Bitcoin later posted a correction of about 30%.

That does not automatically imply the same outcome now, but it reinforces the point that prolonged network softness has historically lined up with periods of weaker market conviction.

Breadth is falling, but throughput is not

Bitcoin’s transaction count has not fallen in step with the number of active addresses.

In mid-August 2025, transaction count averaged about 444,000 per day. Data from Blockchain.com shows the average has been about 439,000 per day over the most recent 30 days.

However, daily prints have still been volatile, ranging from roughly 289,000 to 702,000, but the broader throughput trend has not collapsed.

That divergence is central to the story.

If transaction volume is holding steady while active addresses are falling, it means fewer entities are responsible for the same amount of on-chain activity.

That can happen for several reasons, and none of them require a surge in retail activity. Exchanges and custodians can batch withdrawals.

Larger players can consolidate transfers. Institutional flows can be handled through fewer wallets. Operational activity can cause bursts in transaction counts without signaling a broader return of users.

The result is a chain that still looks busy at times, but with thinner participation underneath.

This is why the decline in breadth is more revealing than raw throughput. A flat transaction count can mask a market where activity is increasingly concentrated among repeat transactors, large entities, and operational flows.

In that setup, Bitcoin’s chain remains functional and active, but less representative of broad user engagement.

Blockchain analytical firm Santiment has framed the backdrop in even starker terms over a longer time horizon.

The firm said that since February 2021, Bitcoin has seen 42% fewer unique addresses making transactions and 47% fewer new addresses created.

Santiment did not present that as proof that crypto is dead or that a multi-year bear market is locked in, but it did describe a bearish divergence that built through 2025, as market caps rose while Bitcoin’s utility metrics weakened.

That same tension is now showing up in the six-month trend. Price and market narratives can stay alive while the chain itself becomes quieter.

Low fees point to thin demand for blockspace

Fees reinforce the idea that Bitcoin is in a thin-demand regime on Layer 1.

Data from mempool.space shows that the blockchain network’s recent average transaction fees have been around $0.24, or about 1.8 sats/vB.

Those are low levels for a network that, in prior cycle peaks, has seen sustained competition for blockspace. At the current transaction pace, that fee level implies under $100,000 per day in transaction fee revenue for the network.

That remains small relative to the block subsidy, which is still about 450 BTC per day.

This is not an immediate security problem, and it does not mean Bitcoin’s security model is under near-term stress.

This is because the block subsidy continues to dominate miner revenue, but it does underline a longer-term reality that Bitcoin has not been forced to confront in this phase of the cycle.

The transition toward a more fee-supported security budget, a topic that returns every cycle, is not being tested in this environment because fee demand is weak.

In practical terms, today’s quiet fee market delays that debate.

The chain is not under pressure from sustained congestion, and users are not competing aggressively for inclusion. That can change quickly in a volatility event, a speculative wave, or a new demand shock, but it has not happened yet.

For now, blockspace looks underused relative to prior bull phases, which fits the broader picture of reduced participation breadth.

CryptoQuant’s framing, that low network activity is often linked to low interest in the asset and periods of broad losses, also fits this fee environment.

When interest falls, fewer new participants arrive, fewer discretionary transfers happen, and fee pressure fades.

Bitcoin can still trade actively as a financial asset, but the chain itself no longer reflects broad engagement.

Macro conditions and ETF flows are changing how Bitcoin trades

The macro backdrop helps explain why this trend has persisted.

Bitcoin is increasingly trading like a macro-sensitive, high-beta asset, especially during risk-off periods.

Over the past year, US inflation has cooled, with CPI at 2.4% year over year in January 2026, and the Federal Reserve’s target range has been cited at 3.50% to 3.75% in late January.

In a simpler market, cooling inflation might have supported a cleaner risk rebound.

Instead, markets have focused on volatility catalysts, including tariff-policy uncertainty, which has pushed rates and the dollar around and kept broader risk appetite unstable.

In that kind of environment, both retail and institutional investors often reduce churn. Retail participation falls. Traders move less often. Institutions can stay engaged, but they are more likely to adjust exposure through products that do not require moving coins on-chain.

That is where spot Bitcoin ETFs become central to the story.

Data from Coinperps show multi-week net ETF outflows, including about $3.8 billion over five weeks and about $4.5 billion in year-to-date outflows.

That shifts activity away from self-custody wallets and toward brokerage accounts.

It also helps explain why the market can remain active while the chain grows quieter. Exposure is still changing hands, but more of that change is being expressed off-chain.

That is a meaningful shift in Bitcoin’s role. It increasingly looks like a financial product with an institutional wrapper, while Layer 1 is used more selectively for settlement, storage, and periodic transfers.

At the same time, daily transactional energy across crypto is concentrating in other areas, especially stablecoins.

Coin Metrics has highlighted stablecoins as a core driver of on-chain activity, with a supply of nearly $300 billion and rising transaction volumes.

If stablecoin rails on other chains are handling more day-to-day settlement, Bitcoin’s Layer 1 naturally becomes narrower in function.

That does not, by itself, weaken Bitcoin’s investment thesis, but it does change its shape.

Three scenarios for the next three to six months

The current six-month decline in network breadth sets up three plausible paths for Bitcoin over the next three to six months.

The first is a continuation of apathy, which looks like the base case in a risk-off tape.

In that scenario, active addresses remain depressed, in a 450,000 to 600,000 range, transaction counts stay choppy but do not collapse, and fees remain low. ETF flows stay flat to negative.

Here, Bitcoin can still move sharply on macro headlines, but on-chain participation does not confirm a broad recovery. The asset trades like a macro instrument, not like a network entering a fresh expansion phase.

The second is a liquidity thaw, which is the more constructive path.

If cooling inflation and easing expectations stabilize risk appetite, ETF flows could shift from outflows to sustained inflows. In that environment, active address growth would become the key confirmation signal.

In this case, a rebound toward 650,000 to 800,000 active addresses would suggest that participation breadth is returning, not just price momentum. That would look more like a classic cycle recovery, with price gains supported by growing on-chain user engagement.

The third is the structural displacement scenario, which may be the most important to watch.

In that scenario, Bitcoin rallies, but on-chain breadth stays muted. ETFs, derivatives, and custodial settlement continue to dominate, while stablecoins absorb more transactional demand elsewhere in crypto.

Here, Bitcoin continues to perform increasingly as a digital macro asset and settlement layer, rather than as a chain with broad, day-to-day retail activity. T

That scenario would signal an evolution in Bitcoin’s role, reflecting how it has changed from what it was years ago.