What impact does the circulation speed of Bitcoin have on future development?

The circulation speed of Bitcoin has reached a ten-year low, symbolizing maturity rather than a warning sign. Its use has shifted from currency to long-term asset, reflecting the growth of institutional adoption and off-chain activities. This article is sourced from a piece by Stefania Barbaglio on Coindesk, organized, translated, and written by Shaw Golden Finance. (Background: Uncovering the founder of Pantera Capital: The thousand-fold legend of buying Bitcoin at $65) (Background Supplement: Helping whales dump 80,000 Bitcoins, why is Galaxy Digital the most crypto-savvy institution on Wall Street?) The on-chain circulation speed of Bitcoin is at its lowest level in a decade, indicating that its use has shifted from currency to long-term asset holding. Institutional adoption has increased, with significant growth in Bitcoin holdings in exchange-traded funds (ETF) and corporate treasuries, reducing on-chain transactions. Off-chain activities, including the use of the Lightning Network and Wrapped Bitcoin, suggest that Bitcoin's economic activity is more vibrant than on-chain indicators show. The on-chain transaction speed of Bitcoin (, or Bitcoin's circulation speed ), is at its lowest level in a decade. Some view this as a dangerous signal: has Bitcoin lost its momentum? Is it still in use? In fact, the decline in circulation speed may be the clearest signal so far that Bitcoin is maturing rather than stagnating. Bitcoin is no longer circulating as cash but is increasingly being held like gold. Change in Function In traditional economics, circulation speed refers to the frequency with which currency changes hands; it is an indicator of economic activity. For Bitcoin, it tracks the frequency of Bitcoin transactions on-chain. In the early stages of Bitcoin's development, due to traders, early adopters, and enthusiasts testing its use cases, the circulation frequency was high. During major bull markets in 2013, 2017, and 2021, trading activity surged, with Bitcoin flowing rapidly between wallets and exchanges. Today, the situation has changed. Over 70% of Bitcoin has not moved in more than a year. Trading activity has decreased. At first glance, this seems to indicate a reduction in usage. But in reality, it reflects a different situation: steadfast confidence. Bitcoin is being viewed as a long-term asset rather than just a short-term currency. This shift is largely driven by institutions. Institutional adoption leads to supply lockup Since the launch of the US spot Bitcoin ETF in 2024, institutional holdings have risen significantly. By mid-2025, spot ETFs are expected to hold over 1.298 million Bitcoins, accounting for approximately 6.2% of the total circulating supply. When including holdings from corporate treasuries, private companies, and investment funds, total institutional holdings approach 2.55 million Bitcoins, representing about 12.8% of all circulating Bitcoins. Most of these assets remain unchanged, stored in cold wallets as part of long-term strategies. Companies like Strategy and TSL have not utilized their Bitcoin but have held it as a strategic reserve. This is favourable for scarcity and price but simultaneously lowers circulation speed: the amount of coins in circulation decreases, and transactions occurring on-chain also decline. Off-chain usage is rising and harder to detect It is important to note that on-chain circulation speed does not encompass all economic activities of Bitcoin. On-chain circulation speed can only explain part of the situation. Nowadays, the real economic activities of Bitcoin increasingly occur off-chain and fall outside the scope of traditional measurement methods. Take the Lightning Network as an example; it is a second-layer scaling solution for Bitcoin that can completely bypass the main chain to enable fast, low-cost payments. From micro-payments for streaming to cross-border remittances, the Lightning Network allows Bitcoin to be used in everyday scenarios, but these transactions are not reflected in the circulation speed metrics. By mid-2025, the public capacity of the Lightning Network has exceeded 5,000 Bitcoins, growing nearly 400% since 2020. The growth of private channels and institutional experimentation indicates that the actual numbers are much higher. Similarly, Wrapped Bitcoin (WBTC) enables Bitcoin to circulate on Ethereum and other chains, powering decentralized finance (DeFi) protocols and tokenized finance. In just the first half of 2025, the supply of WBTC grew by 34%, clearly indicating that Bitcoin is being used rather than lying idle. Then there is the issue of custody: institutional wallets, exchange-traded funds (ETF) cold storage, and multisignature (multisig) financial tools allow companies to hold Bitcoin securely, but these coins are often not transferred. These coins may have significant economic implications but contribute nothing to on-chain transaction speed. In summary, the level of activity of Bitcoin may be higher than it appears; this activity is simply occurring outside of traditional circulation speed indicators. Its utility is shifting to new levels and platforms—payment channels, smart contract systems, yield strategies—that are not reflected in traditional circulation speed models. As Bitcoin evolves into a multi-layered monetary system, we may need new methods to measure its development momentum. The decline in on-chain circulation speed does not necessarily mean that usage is decreasing. In fact, it may just mean we were looking in the wrong direction. Trade-offs behind low transaction speed Although slow transaction speeds indicate steadfast investor confidence and long-term holding, they also pose challenges. A reduction in on-chain transactions means that miners receive fewer fees: this has become an increasingly serious problem after the 2024 block reward halving. Bitcoin's long-term security model relies on a healthy fee market, which in turn requires ongoing economic activity. There is also an issue with public perception. In a network where few coins are circulating, it may begin to look more like a static vault rather than an active market. This may reinforce the argument that Bitcoin is "digital gold," but it undermines its vision as a circulating currency. This is the core design contradiction: Bitcoin is intended to serve simultaneously as a store of value (digital gold) and a medium of exchange (peer-to-peer cash). However, these two roles do not always align. Circulation speed is an indicator of this push-and-pull relationship, this ongoing struggle between value preservation and practicality, and how Bitcoin navigates this situation will not only affect its usage patterns but also determine its role in the broader financial system. A sign of maturity Ultimately, the decline in Bitcoin's circulation speed does not imply a decrease in usage frequency. It indicates that the way people use Bitcoin has changed. As Bitcoin's value increases, people are more inclined to save it rather than spend it. With its widespread adoption, infrastructure is gradually shifting off-chain. As institutions join, their strategies focus more on value preservation rather than circulation. The Bitcoin network is evolving. Circulation speed has not disappeared; it has simply become less active, reshaped by an ever-changing user base and new layers of economic activity. If transaction speeds rise again, it could signal a resurgence in transactional use; increased consumption, faster capital movement, and higher retail participation. If transaction speeds continue to languish, it indicates that Bitcoin's role as macro collateral has become entrenched. In either case, transaction speed provides a window into Bitcoin's future. It is not seen as a currency for consumption but as a buildable asset. Related Reports Musk's Grim Question: Can Quantum Computers Crack Bitcoin? Gave up! Spent 12 years from...