Bitcoin Stuck in Neutral: Off-Chain Volume Surges While On-Chain Activity Flatlines
Bitcoin's price action has gone stale—trading sideways as off-exchange activity hits fever pitch and blockchain transactions dwindle.
The great Bitcoin paradox: More movement, less motion
While institutional players shuffle billions in dark pools and OTC desks, the actual blockchain resembles a ghost town. The king crypto's network hasn't seen this little on-chain action since the depths of the 2022 bear market.
Liquidity shuffle masks underlying stagnation
Whales are playing musical chairs with Bitcoin bags—just don't look for the transactions on-chain. Meanwhile, retail traders sit on their hands waiting for the next big move (or another 'institutional adoption' press release to pump their bags).
When off-chain volume outpaces real usage by orders of magnitude, even Wall Street's quant jockeys would blush at the leverage-fueled charade. The 'digital gold' narrative holds—as long as nobody checks the settlement layer.
Bitcoin sees reduced on-chain activity amid surge in centralized exchange volume
Bitcoin's remarkable push above the $100,000 price level has been accompanied by a notable decline in transaction counts, per a Glassnode report on Thursday. The low transaction count is largely driven by a fall in non-monetary transactions, resulting in lower overall throughput.
BTC’s average transaction volume sits at $36.2K, indicating that although transaction counts are down, each transaction still holds sufficient value. This shows that larger entities are still actively using the bitcoin network despite reduced on-chain activity.
However, it also reveals a divergence between Bitcoin's growing market value and its underlying network usage. In previous bull cycles, price rallies drove heavy on-chain congestion and heightened transaction fees.
Using the Fee Revenue Multiple (FRM) — a ratio that provides insight into the dominance of miner income — Glassnode revealed that on-chain fees have remained low despite Bitcoin trading NEAR its all-time high.
As on-chain activity declines, much of Bitcoin's volume is now being pushed into centralized exchanges. Glassnode highlights the growing influence among centralized trading platforms, which have facilitated most of Bitcoin's trading activity during this cycle.
“When comparing the volume traded off-chain (spot, futures, and options) to value settled on the network, we note off-chain volume has regularly been 7- 16x larger than the on-chain volume,” Glassnode said in its report.
With the rise in off-chain volume, derivatives open interest continues to grow, highlighting a build-up of leverage trading.
The report noted that Bitcoin's 30-day change in aggregate open interest has grown increasingly volatile compared to levels seen in 2023. While open interest remained stable throughout 2023, it began experiencing fluctuations following the launch of US Spot ETFs in January 2024.
Glassnode suggests that this rising volatility points to a broader market shift, typically from one dominated by spot trading to a more derivatives-driven structure. The report further adds that the transition “increases the risk of cascading liquidations” and could lead to a more unstable market environment.
Bitcoin continues to trade above $104,000 on Friday, as broader macroeconomic factors continue to impact its price.
