Bitcoin’s on-chain users down 30%; ETFs bleed $4.5 billion: What’s next over the next three months?

Author: Oluwapelumi Adejumo

Translation: TechFlow

TechFlow Intro: Trading volume has not collapsed—but active addresses have shrunk continuously for six months, hitting a five-year low. This divergence—“surface prosperity masking underlying emptiness”—is a contrarian signal of structural weakness in the bull market.

This article cross-validates data from Glassnode, Santiment, and CryptoQuant to propose three potential future scenarios—offering a useful framework for assessing BTC’s near-term trajectory.

Full Text Below:

Bitcoin’s on-chain activity has weakened for six consecutive months—but this trend is not reflected in many core metrics that traders instinctively monitor first.

A clearer signal lies not in trading volume—which has remained broadly stable—but in participation breadth. Even as the network continues processing roughly the same number of transactions, the number of active on-chain addresses keeps declining.

This divergence is critical in a market where price discovery increasingly occurs via ETFs and derivatives. It signals that Bitcoin’s on-chain footprint is narrowing, while market exposure remains active elsewhere.

As the bear market persists, this trend has become increasingly hard to ignore.

Glassnode data shows that Bitcoin’s 8-day moving average of active addresses stood at approximately 778,680 in mid-August 2025. As of February 23, that figure had fallen to about 535,942—a decline of roughly 31%.

CryptoQuant has also flagged low network activity for six consecutive months, characterizing the current phase as one of sustained weakness in on-chain participation.

Bitcoin Active Addresses Momentum

Source: CryptoQuant

The last time the market exhibited a similar pattern was in 2024—after which Bitcoin experienced a roughly 30% correction.

This does not guarantee a repeat—but it reinforces a historical pattern: prolonged network weakness often coincides with waning market confidence.

Breadth Shrinks, But Throughput Holds

Bitcoin’s transaction count has not declined in tandem with active addresses.

In mid-August 2025, the daily average transaction count stood at ~444,000. According to Blockchain.com, the 30-day average over the past month is ~439,000.

Daily figures still fluctuate—from ~289,000 to ~702,000—but overall throughput has not collapsed.

This divergence is key to understanding the current situation.

If transaction volume holds steady while active addresses decline, fewer entities are carrying out the same level of on-chain activity.

Multiple drivers can explain this—none requiring retail inflows. Exchanges and custodians can batch withdrawals; large holders can consolidate transfers; institutional flows can be routed through fewer wallets; and operational activity may cause short-lived spikes in transaction counts without signaling genuine user re-engagement.

The result? The chain appears busy—but the underlying pool of participants is shrinking.

That’s why declining breadth matters more than raw throughput. Flat transaction counts may mask a market where activity is increasingly concentrated among repeat transactors, large institutions, and operational capital flows.

In this setup, Bitcoin’s chain continues operating normally—but the breadth of user participation it reflects is becoming less authentic.

Blockchain analytics firm Santiment offers an even starker long-term perspective.

It reports that the number of unique addresses initiating Bitcoin transactions has fallen 42% since February 2021—and newly created addresses have dropped 47%.

Santiment does not characterize this as evidence that crypto is “dead” or that a multi-year bear market is locked in—but it does describe a persistent bearish divergence throughout 2025: rising market cap alongside weakening utility metrics for Bitcoin.

This tension now manifests across a six-month trend. Price and market narratives can persist—but the chain itself is growing quieter.

Low Fees Signal Shrinking Block Space Demand

Fee data further confirms weak demand for Bitcoin Layer 1.

According to mempool.space, the network’s recent average transaction fee stands at ~$0.24—or ~1.8 sats/vB.

For a network that previously experienced sustained block space competition during peak cycles, this qualifies as a low level. At current transaction rates, this fee level implies daily fee revenue of under $100,000.

By contrast, the block subsidy currently remains ~450 BTC per day—making fee revenue a tiny fraction of miner income.

Bitcoin Average Block Fees

Source: Mempool.space

This is not an immediate security concern, nor does it indicate near-term pressure on Bitcoin’s security model.

That’s because the block subsidy still dominates miner revenue. But it does point to a longer-term reality Bitcoin has yet to confront in this cycle: the transition toward a fee-funded security budget.

This topic resurfaces every cycle—but in the current environment, the transition remains untested, precisely because fee demand itself is so weak.

Practically speaking, today’s quiet fee market postpones that discussion.

The chain faces no persistent congestion pressure; users aren’t fiercely bidding for inclusion. This could shift rapidly amid volatility events, speculative surges, or new demand shocks—but none have occurred yet.

For now, block space utilization sits clearly below levels seen in prior bull markets—consistent with the broader decline in participation breadth.

Bitcoin's Empty Mempool

Source: Mononaut

CryptoQuant’s assessment aligns with this fee environment—low network activity typically correlates with declining investor interest and periods of widespread unrealized losses.

As interest fades, new participants dwindle, and self-initiated transfers decline, fee pressure naturally recedes.

Bitcoin remains actively traded as a financial asset—but its chain no longer reflects broad user participation.

Macro Conditions and ETF Flows Are Reshaping Bitcoin’s Transactional Behavior

The macro backdrop helps explain why this trend endures.

Bitcoin is increasingly behaving like a high-beta, macro-sensitive asset—especially pronounced during risk-averse periods.

Over the past year, U.S. inflation has cooled, with January 2026 CPI year-on-year growth at 2.4%; the Fed’s target rate range was cited at 3.50%–3.75% as of late January.

In simpler market conditions, cooling inflation might support a clearer risk-asset rally.

Yet market attention remains focused on multiple volatility catalysts—including uncertainty around tariff policy. This factor has driven sharp swings in rates and the dollar, sustaining overall risk sentiment instability.

In such an environment, both retail and institutional investors tend to reduce trading frequency. Retail participation drops, and trader turnover slows. Institutions can maintain exposure but prefer adjusting positions via products that don’t require on-chain movement.

This is precisely why spot Bitcoin ETFs have become the dominant narrative.

Coinperps data shows U.S. Bitcoin ETFs have posted net outflows for multiple consecutive weeks—cumulative outflows of ~$3.8 billion over the past five weeks, and ~$4.5 billion year-to-date.

U.S. Bitcoin ETF Daily Net Flows (2026)

Source: Coinperps

This shifts activity from self-custodied wallets to brokerage accounts.

It also explains how markets can remain active while the chain grows quieter. Exposure continues changing hands—but more of that turnover happens off-chain.

This marks a pivotal evolution in Bitcoin’s role. It is increasingly resembling a financial product wrapped in institutional infrastructure, while Layer 1 is used more selectively—for settlement, storage, and periodic transfers.

Meanwhile, day-to-day transactional energy in crypto is concentrating elsewhere—particularly in stablecoins.

Coin Metrics identifies stablecoins as the core driver of on-chain activity, with total stablecoin supply now nearing $300 billion and trading volumes climbing steadily.

If stablecoin rails on other chains absorb more routine settlement demand, Bitcoin’s Layer 1 naturally becomes functionally more singular.

This does not weaken Bitcoin’s investment thesis—but it does reshape its form.

Three Scenarios for the Next Three to Six Months

The current six-month decline in network breadth outlines three possible paths for Bitcoin’s trajectory.

The first is continued apathy—a baseline scenario under risk-averse market conditions.

Here, active addresses hold steady at low levels (450,000–600,000), transaction counts remain volatile but intact, fees stay low, and ETF flows stay flat or modestly negative.

Bitcoin may still swing sharply on macro headlines—but on-chain participation won’t confirm broad-based recovery. Its trading logic resembles a macro tool—not a network entering a new expansion phase.

The second is liquidity thaw—the more optimistic path.

If inflation continues easing and dovish expectations stabilize risk appetite, ETF flows could shift from net outflows to sustained net inflows. In this environment, growth in active addresses would serve as the key confirmation signal.

A rebound to 650,000–800,000 active addresses would signal recovering participation breadth—not just renewed price momentum. This would resemble a classic cyclical recovery—where price gains are underpinned by expanding on-chain user engagement.

The third is structural substitution—the most consequential scenario.

Here, Bitcoin’s price rises—but on-chain breadth remains persistently weak. ETFs, derivatives, and custodial settlement continue dominating, while stablecoins absorb more transactional demand elsewhere in crypto.

In this case, Bitcoin evolves into a digital macro asset and settlement layer—not a chain with broad, everyday retail activity.

This scenario would mark a definitive evolution in Bitcoin’s role—reflecting profound changes from its earlier years.