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October 31, 2020
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Bitcoin

What caused the drop in Bitcoin network activity?

More hold, less trade

Daily transaction activity began to grow steadily earlier this year, which coincided with the rise in Bitcoin’s price. Trade and mining increased, which increased this number. However, the transaction count changed sharply earlier this month, with the price falling along with the global economy.

Earlier this year the total daily transactions rose to 350,000. Now, however, it’s about 275,000 a day and falling.

Several factors contributed to this decline. Lower prices have led to less mining activity, as evidenced by a noticeable drop in the network’s hash power in recent days. Most notably, Bitcoin owners withdrew thousands of coins from exchanges, causing trade activity to decrease.

The main conclusion of these moves is that Bitcoin investors are now more interested in keeping their funds safe in personal portfolios than in exchanges. Cold wallet storage means less network activity, which can be seen in the data.

Backing up this notion is the fact that the number of Bitcoin wallets continues to grow constantly, as does diversity. Currently, there are more than 100,000 more active addresses than there were at the beginning of the month.

Few transactions reveal Bitcoin is a safe haven

Ironically, the decline in network activity demonstrates that Bitcoin is healthy and safe. Investors who move their currencies to self-controlled wallets indicate that the cryptocurrency is being treated as a safe haven during this period of global economic stress.

In addition, this action helps to increase the value of Bitcoin by reducing the available supply used for trading. In fact, Bitcoin supporters should be more concerned with many daily transactions than few.

Currently, the network can handle only about 600,000 transactions per day, with no fees and congestion becoming a problem. Until the Lightning Network, or some other scaling solution becomes more user-friendly, the problem with a lot of activity is real.

Bitcoin transaction numbers are likely to return as the market recovers. However, for now this data indicates that the cryptocurrency is working exactly as designed.

Source: Bitcoinist

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