Bitcoin is soaring, but is the Bitcoin network becoming an on-chain ghost town?

Discuss the investor activities in the on-chain and off-chain markets, and analyze the changes in this cycle through network indicators.

Written by: UkuriaOC, CryptoVizArt, Glassnode

Translated by: AididiaoJP, Foresight News

Summary

• The number of on-chain transactions has decreased, but the settlement volume has increased, indicating that the usage by large entities has grown. Although the number of transactions has decreased, the average transaction size has significantly increased, suggesting that institutions or high-net-worth participants are dominating on-chain activities.
• Despite the Bitcoin trading price being close to its historical highs, on-chain fees remain sluggish, and the demand for block space is still very low. This creates a significant contrast with previous cycles. In past cycles, price increases were typically accompanied by congestion and rising fees due to increased network usage.
• Trading activities are increasingly shifting to off-chain, with centralized exchanges now accounting for the majority of trading volume, especially in the futures market. It is noteworthy 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, with the total open interest in futures and options reaching $96.2 billion. The collateral structure has significantly improved, with stablecoin margin positions currently accounting for the majority of the open interest.

On-chain Ghost Town

Bitcoin is currently holding steady above the important psychological level of $100,000, just 6% away from its historical high of $111,700. People might expect that the on-chain activity of the Bitcoin network would be equally active; however, there has been a noticeable divergence: spot prices remain high, while network activity is unusually quiet.

To assess this disconnection, we first analyzed the daily number of transactions settled on the Bitcoin network. During the period from 2023 to 2024, the number of transactions showed a structural upward trend, peaking at 734,000 transactions per day. Since the beginning of 2025, the throughput has significantly declined, with the daily transaction count ranging between 320,000 and 500,000, a significant contraction compared to the peaks earlier in this cycle.

To better understand the nature of Bitcoin network activities, we can categorize transactions into two types:

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

In the past year, the number of token transactions has remained relatively stable, indicating a stable foundation for value transfer activities. On the other hand, non-token transactions have exhibited a more volatile pattern. From July to December 2024, there was a surge in demand for non-token transactions, significantly increasing the total volume of transactions. However, since the beginning of 2025, non-bulk transaction activities have sharply declined, severely leading to a recent shrinkage in overall network throughput.

Trading volume remains strong

Despite a decline in the number of transactions, the economic volume settled on the Bitcoin network remains at historically high levels, averaging $7.5 billion settled daily, peaking at $16 billion during the price breakout of $100,000 in November last year.

Currently, the average transaction amount per transaction is $36,200, which indicates that although the trading volume has decreased, the value of each transaction is still significant. This trend suggests that larger entities continue to use the Bitcoin network, and even though the overall transaction volume has declined, the throughput per transaction is still increasing.

To validate the hypothesis that large entities are increasingly using the Bitcoin network for value transfer, we can analyze settlement volume by transaction size. Transactions over $100,000 show a clear structural dominance, accounting for 66% of network transaction volume in November 2022, which has now risen to 89%. This trend reinforces the view that high-value participants are increasingly dominating on-chain activities.

In contrast, the trading volume of $100,000 or less experienced a significant shrinkage during the same period. After peaking at a relative dominance of 34% in December 2022, this group has structurally declined in its share of total transfer volume, now accounting for only 11%.

A more detailed segmentation of various subgroups indicates that this trend is consistent overall, with a significant decline in the network capacity share of each group.

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

On-chain fees are at a historical low.

For many years, Bitcoin transaction fees have been influenced by technological upgrades and changes in usage patterns. The introduction of SegWit has reduced the actual size of transactions, providing fee discounts; while centralized exchanges have adopted batch processing as an industry standard practice, further improving efficiency by combining multiple withdrawals into a single transaction. Recently, the embedding of arbitrary data into the blockchain through inscriptions and runes (Inscriptions and Runes) has led to periodic spikes in fees, often causing network congestion.

Historically, on-chain fees have been a reliable indicator of network demand. When block space is relatively small compared to overall transaction demand, fee pressure can rise sharply. In a high-pressure environment, limited block space forces users to compete for transaction packaging and sorting, with the fees themselves acting as a pressure relief valve. Therefore, rising fees typically indicate an increase in demand for block space, signaling a rise in user activity levels and speculative interest.

However, in the past few months, miners' transaction fee income has significantly declined, averaging only $558,000 per day last month. This sluggish fee pressure indicates a significant drop in demand for block space, sending a similar signal to the overall reduction in transaction volume.

The fee income multiple (FRM) refers to the ratio of the total rewards for miners (block subsidies and transaction fees) to the total amount of fees. This ratio helps to understand the composition and proportion of miner income.

During previous bull markets, and typically during the formation of historical peaks, this ratio tends to decline. As network activity increases and demand for transactions rises, the fee pressure also surges.

However, the current cycle presents a rather unique market structure. Although the trading price of Bitcoin is slightly below its historical peak, the FRM ratio remains unusually high. This discrepancy highlights that the fee pressure is relatively low at present, indicating that on-chain activity is surprisingly calm, especially in a market where the trading price is close to historical highs.

off-chain trading volume increase

The Bitcoin economy consists of on-chain and off-chain components, each playing a crucial role in the market dynamics of the asset. As the consensus around Bitcoin continues to strengthen and the range of available financial instruments expands, the influence of centralized exchanges is growing. These platforms facilitate the majority of trading activities and have become key venues for price discovery.

Therefore, assessing the exchange's off-chain activities is crucial for building an overall view of Bitcoin ecosystem activities.

Starting from the spot market, the trading activity of centralized exchanges has remained strong over the past year, with an average daily trading volume of 10 billion USD, reaching a peak of 23 billion USD in November 2024. Notably, this scale of spot trading volume is typically comparable to the daily on-chain settlement trading volume, highlighting the parallel scale of activities between the spot market and the underlying layer network.

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

During this period, trading activity in futures contracts has increased significantly, with an average daily trading volume of 57 billion USD over the past year. In addition, in November 2024, the futures trading volume reached an astonishing peak, hitting 122 billion USD per day. The scale of trading volume in the futures market highlights the dominant position of these instruments for speculators, traders, and hedgers.

In addition, the options trading volume has increased significantly during this period, with an average daily trading volume of 2.4 billion USD over the past year, peaking at 5 billion USD. This surge highlights the growing use of options 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 volumes highlights a shift in trading activities, with increasing amounts of volume moving from the underlying Bitcoin to off-chain trading platforms. When comparing off-chain trading volumes (spot, futures, and options) to on-chain settlement values, we observe that off-chain trading volumes are typically 7 to 16 times greater than on-chain trading volumes.

This transformation could significantly affect the way we interpret network metrics, as traditional metrics may no longer fully reflect market activity. However, on-chain markets remain the core of the Bitcoin economy and constitute the foundational layer for the operation of a broader ecosystem. Deposits and withdrawals are the main link between off-chain platforms and the Bitcoin network, and on-chain activity is likely to continue playing a crucial role in market structure and capital flow.

Leverage Accumulation

Since we have established the growing role of derivatives in the Bitcoin ecosystem, we will now turn our attention to the open contracts of futures and options to assess the accumulation of market leverage.

Both markets have experienced significant growth in open interest (OI), with futures open interest increasing from $7.7 billion to $52.8 billion, and options open interest rising from $3.2 billion to $43.4 billion. The total open interest for derivatives peaked at $114 billion and currently remains high at around $96.2 billion. This continued expansion reflects a substantial increase in leverage within the Bitcoin economy, which may heighten the risk of price volatility.

When evaluating the changes in the total open interest over 30 days, we observed that the volatility has been accelerating. Throughout 2023, the changes in open interest were relatively smooth; however, with the launch of the US spot ETF in January 2024, these fluctuations began to intensify.

The increase in the volatility of open contracts signifies that a broader market is transforming from a structure predominantly driven by spot activity to one dominated by derivatives. This shift increases the risk of off-chain liquidations and leads to a more unstable and reflexive market environment.

To quantify the accumulation of leverage, we calculated the realized market value leverage ratio, which compares the total open contracts to the realized market value of Bitcoin (i.e., the total dollar value stored on the network). A significantly positive bias in this ratio indicates that speculative activity in the derivatives market has increased relative to the size of the underlying asset, suggesting a rise in leverage and potential fragility in the market structure. Conversely, a contraction in this ratio indicates that a deleveraging phase is underway.

Currently, the leverage ratio remains as high as 10.2%. In 1679 trading days, only 182 trading days (10.8%) had a leverage ratio above this level. This highlights the significant increase in market leverage and further reinforces the increasingly dominant position of derivatives in shaping the current market landscape.

However, because traders can choose stablecoin margin or cryptocurrency margin as collateral, the collateral structure of open contracts is not uniform. Stablecoin margin positions are more conservative, with their collateral pegged to the US dollar; while cryptocurrency margin positions introduce additional volatility to trading, as the value of the underlying collateral itself fluctuates with the market.

To assess the overall health of the collateral structure in the derivatives market, we calculated the actual market value leverage ratio of stablecoin margin and cryptocurrency margin open contracts separately. During the 2018-2021 cycle, cryptocurrency margin collateral was the preferred choice for investors. Coupled with the widespread use of 100x leverage, this structurally weaker collateral base exacerbated the market decline in May 2021.

Since the highly publicized collapse of FTX, stablecoin collateral has become the primary form of margin, currently accounting for the vast majority of collateral in open contracts. This shift highlights the increasing maturity of the derivatives system surrounding digital assets and the movement towards more stable risk management practices.

Conclusion

Despite the rise in Bitcoin prices, there has been a noticeable divergence between market valuation and network activity, with transaction volumes still unusually low, primarily due to a sharp decline in non-token transactions. The decrease in throughput has led to a significant drop in miner fee revenues, contrasting sharply with previous bull market cycles, where rising prices typically resulted in network congestion and soaring fees.

Nonetheless, the settlement volume of the network remains quite substantial, with an average daily settlement amount reaching as high as 7.5 billion USD. The lower number of transactions and higher transaction throughput indicate that large entities are increasingly dominating on-chain activities. Moreover, the trading volume of off-chain trading platforms has also shown strong growth, with the total trading volume of spot, futures, and options typically exceeding on-chain settlement volume by 7 to 16 times.

The leverage in the derivatives market continues to rise, with the total open interest of futures and options remaining at a historic high of $96.2 billion. However, the composition of the underlying collateral structure has significantly improved, with stablecoin margin positions currently occupying the majority of open contracts. This shift highlights the increasing maturity of the derivatives system surrounding digital assets and the movement towards more robust risk management practices.