Bitcoin has been singing all the way, but the Bitcoin network has become an on-chain ghost town?

Author: UkuriaOC, CryptoVizArt, Glassnode

Compiled by: AididiaoJP, Foresight News

summary

• The number of on-chain transactions decreased, but the settlement volume increased, indicating an increase in usage of large entities. Although the number of transactions decreased, the average transaction size increased significantly, indicating that institutional or high net worth participants are dominant in on-chain activities.
• Although Bitcoin trading prices are close to historical highs, on-chain fees are still sluggish and demand for block space remains small. This is a significant difference from previous cycles. In previous cycles, rising prices were usually accompanied by soaring expenses caused by congestion and rising network usage.
• Trading activity is increasingly shifting off-chain, with centralized exchanges now occupying most of the trading volume, and even more so in the futures market. It is worth noting that the total trading volume of spot, futures and options is usually 7 to 16 times higher than the on-chain settlement volume.
• Leverage continues to accumulate, and the total open contracts for futures and options have reached US$96.2 billion. The collateral structure has improved significantly, and stablecoin margin positions currently account for the majority of open contracts.

The ghost city on the chain

Bitcoin is currently firmly above an important psychological threshold of $100,000, just 6% away from its all-time high of $111,700. People may expect the on-chain activity of the Bitcoin network to be equally active, but the situation has shown a clear differentiation: spot prices are still high, while network activity is extremely calm.

To evaluate this disconnect, we first analyzed the number of transactions settled daily on the Bitcoin network. From 2023 to 2024, the number of transactions showed a structural upward trend, with a peak of 734,000 transactions per day. Throughput has dropped significantly since the beginning of 2025, with daily transactions ranging between 320,000 and 500,000, which has significantly shrunk compared to the highs in the early stages of the cycle.

To better understand the nature of Bitcoin network activity, we can divide transactions into two categories:

• Token trading involves value transfer.
• Non-token transactions, such as transactions related to inscriptions and runes, embed arbitrary data through the Taproot Witness Data and the OP_RETURN field, respectively.

The number of token transactions has remained relatively stable in the past year, indicating that the basis of value transfer activities is stable. On the other hand, non-token trading shows a more volatile pattern. During the July-December 2024, demand for non-token trading surged, significantly increasing the total transaction volume. However, since the beginning of 2025, non-large transaction activity has dropped significantly, seriously leading to a recent shrinkage of overall network throughput.

Trading volume remains strong

Despite the shrinking transaction volume, the economy of Bitcoin network settlement remains at an all-time high, with an average settlement of $7.5 billion per day and peaking at $16 billion during the historical price breakthrough of $100,000 last November.

The current average transaction volume per transaction is $36,200, indicating that while the transaction volume has decreased, the value of each transaction is still huge. This trend suggests that larger entities continue to use the Bitcoin network, and throughput per transaction is still rising even as overall transaction volume drops.

To verify the assumption that large entities are increasingly using the Bitcoin network for value transfer, we can analyze settlement volumes by transaction size. Transactions over $100,000 show a significant structural dominance, accounting for 66% of online transaction volume in November 2022 and have now risen to 89%. This trend reinforces the view that high-value players are increasingly dominant in on-chain activities.

In contrast, trading volumes of $100,000 or less experienced significant shrinkage over the same period. After reaching a relatively dominant peak in December 2022, this group's share of total transfers has declined structurally to only 11% today.

A more detailed breakdown of the individual subgroups shows that this trend is overall consistent with a significant decline in network capacity share for each group.

• 0-1000 USD: 3.9% to 0.9%
• USD 1000-10000: 8.4% to 2.1%
• $10,000 to $100,000: 21.4% to 7.9%

On-chain fees are at historically low

For many years, Bitcoin transaction fees have been affected by technological upgrades and usage patterns. The introduction of SegWit reduces the actual scale of transactions and provides fee discounts; while centralized exchange batch processing has become the industry standard practice, further improving efficiency by combining multiple withdrawals into a single transaction. Recently, inscriptions and runes that embed arbitrary data into blockchains have caused periodic expenses to soar, often causing network congestion.

Historically, on-chain fees have been a reliable indicator of network demand. When the block space is small relative to the overall transaction demand, the fee pressure will rise sharply. In high-pressure environments, limited block space forces users to compete for the packaging and sorting of transactions, and the fees themselves play the role of pressure relief valves. Therefore, the increase in expenses usually indicates an increase in demand for block space, which indicates an increase in user activity and speculative interest.

However, miners' transaction fee income has dropped sharply over the past few months, with an average of only $558,000 per day last month. This sluggish fee pressure indicates a significant decline in demand for block space, which sends a similar signal to the overall reduction in transaction volume.

Fee Income Multiple (FRM) refers to the ratio of the total miner's total reward (block subsidy and transaction fees) to the total fee. This ratio helps understand the composition and proportion of miners' income.

This ratio tends to drop during previous bull markets, and usually during historical highs, with expense pressures also spiking as network activity increases and transactions incorporate demand increases.

However, the current cycle presents a rather unique market structure, and although Bitcoin trading prices are slightly below its historical highs, the FRM ratio remains unusually high. This difference highlights the relatively small current fee pressure, indicating that on-chain activity is surprisingly calm, especially in a market with transaction prices close to historical highs.

Off-chain transaction volume increases

The Bitcoin economy consists of two parts on-chain and off-chain, each of which plays a crucial role in the market dynamics of the asset. As Bitcoin’s consensus continues to grow and the scope of available financial instruments expands, the influence of centralized exchanges is increasing. These platforms facilitate most trading activities and become a key place for price discovery.

Therefore, evaluating the off-chain activity of the exchange is crucial to building an overall view of activity in the Bitcoin ecosystem.

Starting from the spot market, trading activity on centralized exchanges has remained strong over the past year, with daily trading volume reaching US$10 billion and peaking at US$23 billion in November 2024. It is worth noting that spot trading volumes of this scale are usually comparable to those settled on the daily chain, highlighting the parallel scale of activities between the spot market and the underlying layer network.

In the derivatives market, the futures trading volume of perpetual contracts and calendar contracts is the largest, and is usually an order of magnitude larger than the on-chain, spot and options trading volume.

Trading activity of futures contracts increased significantly during this cycle, with an average daily trading volume of US$57 billion in the past year. In addition, in November 2024, futures trading volume reached an astonishing peak, reaching US$122 billion per day. The scale of trading volume in the futures market highlights the dominance of these instruments for speculators, traders and hedge risk-helders.

In addition, options trading volumes rose sharply during the period, with an average daily trading volume over the past year reaching US$2.4 billion, reaching a maximum of US$5 billion. This surge highlights the growing use of option contracts by mature market participants, with investors increasingly utilizing options to implement advanced risk management strategies and fine-tune their market exposure.

The growth in spot and derivatives trading volume highlights the shift in trading activity, with more and more trading volumes shifting from the underlying Bitcoin to off-chain trading platforms. When comparing off-chain trading volumes (spot, futures, and options) with network settlement value, we noticed that off-chain trading volumes are usually 7 to 16 times the on-chain trading volume.

This shift may significantly affect the way we interpret network metrics, as traditional metrics may no longer fully reflect market activity. However, on-chain markets remain at the heart of the Bitcoin economy and form the basic layer for the operation of a wider ecosystem. Charge is the main link between off-chain platforms and the Bitcoin network, and on-chain activities are likely to still play a crucial role in market structure and capital flows.

Leverage accumulation

Now that we have identified derivatives growing in the Bitcoin ecosystem, we are now turning our attention to open contracts for futures and options contracts to assess the accumulation of market leverage.

Open-ended (OI) in both markets experienced significant growth, with futures open-ended from $7.7 billion to $52.8 billion and options open-ended from $3.2 billion to $43.4 billion. The total open contracts for derivatives peaked at US$114 billion, and are still at a high of approximately US$96.2 billion. This continued expansion reflects a significant increase in leverage in the Bitcoin economy, which may exacerbate the risk of price volatility.

When evaluating the change in the 30-day total open contract volume, we observed that the volatility has been accelerating. Throughout 2023, open contract volume changes were relatively flat, however, with the launch of U.S. spot ETFs in January 2024, these volatility began to intensify.

The intensification of open contract volatility marks a broader market transformation from a market structure driven primarily by spot activities to a derivative-led market structure. This shift increases the risk of chain liquidation and leads to a more unstable and reflective market environment.

To quantify the accumulation of leverage, we calculated the realized market cap leverage ratio, which compares the total open contract with the realized market cap of Bitcoin (i.e., the total value of USD stored on the network). The significant positive deviation of this ratio indicates that speculation in the derivatives market has increased relative to the size of the asset's underlying scale, indicating that leverage ratios are rising and that there may be vulnerability in the market structure. On the contrary, the shrinkage of this ratio indicates that the deleveraging phase is underway.

Currently, the leverage ratio is still as high as 10.2%, and in the 1679 trading days, only 182 trading days (10.8%) have a higher leverage ratio than this level. This highlights the significant increase in the market leverage ratio and further strengthens the increasing dominance of derivatives in shaping the current market structure.

However, since traders can choose stablecoin margin or cryptocurrency margin as collateral, the collateral structure of open positions is not uniform. The margin position of stablecoins is more conservative, with collateral pegged to the US dollar; while the margin position of cryptocurrency brings additional volatility to the transaction, and the value of its underlying collateral itself will fluctuate with the market.

To assess the overall health of the collateral structure of the derivatives market, we calculated the actual market capitalization leverage ratios of stablecoin margin and cryptocurrency margin open contracts, respectively. Cryptocurrency margin collateral is the first choice for investors during the 2018-2021 cycle. Coupled with the widespread use of 100x leverage, this structurally weaker collateral base is exacerbating the decline in the market in May 2021.

Since FTX's high-profile collapse, stablecoin margin collateral has become the main form of margin and currently accounts for the vast majority of open contract collateral. This shift highlights the growing maturity of derivatives systems around digital assets and the advancement of risk management practices in a more stable direction.

in conclusion

Despite the rising Bitcoin price, there was a clear divergence between market valuation and network activity, and the number of transactions remained abnormally sluggish, mainly due to the sharp decline in non-token transactions. The decline in throughput has led to a sharp decline in miner fee income, which is in stark contrast to previous bull market cycles, where rising prices usually lead to network congestion and surge in handling fees.

Despite this, the settlement volume of the network is still considerable, with an average daily settlement amount of up to US$7.5 billion. Lower transaction counts and higher transaction throughput indicate that large entities are increasingly dominant in on-chain activity. In addition, the trading volume of off-chain trading platforms has also achieved strong growth, with the total trading volume of spot, futures and options usually 7 to 16 times higher than the on-chain settlement volume.

The leverage ratio in the derivatives market continued to rise, and the total open contracts for futures and options remained at an all-time high of US$96.2 billion. However, the composition of the underlying collateral structure has improved significantly, with stablecoin margin positions currently occupying the majority of open contracts. This shift highlights the growing maturity of derivatives systems around digital assets and the advancement of risk management practices in a more stable direction.