Bitcoin Update: Is Network Activity Keeping Up With Demand?

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Bitcoin Update: Is Network Activity Keeping Up With Demand?

By: Cooper Duschang & The Coin Metrics Team

Introduction

The growth of regulated Bitcoin investment vehicles and a stream of supportive cryptocurrency legislation has led to a rally in Bitcoin’s price. While there have been improvements in investor accessibility, the sustainability of the underlying network has been dismissed. A long-term investment thesis is incomplete without consideration for network activity.

Our initial Bitcoin Asset Analysis in September 2024 highlighted the increasing scarcity of BTC, its benefits in modern portfolio theory, and the emergence of Bitcoin ETFs. Since then, BTC has reached a price over $124,000 and ETF inflows trend higher. In this issue of Coin Metrics’ State of the Network, we unpack key findings from our latest Bitcoin Asset Update, examining demand drivers, network activity, and emerging developments in the Bitcoin ecosystem for 2025 and beyond.

Key Takeaways from the Report:

Demand for BTC Exposure

  • Sustained inflows into spot Bitcoin ETFs and the performance of digital asset treasury vehicles such as Strategy highlight investor demand for gaining exposure to Bitcoin (BTC). While this potentially consolidates holdings among few institutions, these products are broadening access for traditional investors.

Lagging Activity

  • Despite record prices, Bitcoin blocks are not consistently full. While this allows low-value transactions to be included and broadens accessibility, it also raises concerns about miner profitability, as limited fee generation weakens incentives to sustain network security.

Growing Use-Cases for BTC

  • Wrapped BTC products and emerging native Bitcoin applications are creating new opportunities for holders to earn yield and drive network activity. However, transaction fees remain subdued, failing to rise above $150 since August 2024. Over time, fee revenue will need to play a larger role in sustaining miner incentives and network security.

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