The number of on-chain Bitcoin transactions has decreased, but the settlement volume has increased, indicating that the usage by larger entities has risen. While the number of transactions has decreased, the average transaction size has significantly increased, suggesting that institutional or high-net-worth participants are increasingly dominating on-chain activity.

Despite Bitcoin's trading price approaching historical highs, on-chain fees remain sluggish, and demand for block space is still minimal. This marks a significant difference from previous cycles, where price increases were typically accompanied by congestion and spikes in fees due to rising network usage.

Trading activity is increasingly shifting 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 on-chain settlement volumes.

Leverage continues to accumulate, with total open interest in futures and options reaching $96.2 billion. The collateral structure has improved significantly, with stablecoin margin positions now occupying the majority of open interest.

On-chain ghost town

Bitcoin is currently holding steady above the important psychological level of $100,000, just 6% shy of its historical high of $111,700. One might expect on-chain activity on the Bitcoin network to be equally vibrant; however, there is a notable divergence: spot prices remain high while network activity is unusually quiet.

To assess this disconnect, we first analyze the number of daily transactions settled on the Bitcoin network. From 2023 to 2024, the number of transactions shows a structural upward trend, peaking at 734,000 transactions per day. Since early 2025, throughput has significantly declined, with daily transaction numbers ranging between 320,000 and 500,000, a marked contraction compared to the early highs of this cycle.

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

Token transactions, involving 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. Conversely, non-token transactions have exhibited a more volatile pattern. During the period from July to December 2024, non-token transaction demand surged, significantly increasing total trading volume. However, since early 2025, large non-token transaction activity has sharply declined, severely impacting the recent contraction in overall network throughput.

Trading volume remains strong

Despite a contraction in transaction numbers, the economic volume settled on the Bitcoin network remains at historical highs, averaging $7.5 billion settled daily, peaking at $16 billion during the historical price breakout of $100,000 in November last year.

The average transaction amount currently stands at $36,200, indicating that while trading volume has decreased, the value per transaction remains significant. This trend suggests that larger entities continue to use the Bitcoin network, as the throughput per transaction rises despite the overall drop in trading volume.

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 exceeding $100,000 show a clear structural dominance, accounting for 66% of network transaction volume in November 2022, and have now risen to 89%. This trend reinforces the view that high-value participants are increasingly dominating on-chain activity.

In contrast, trading volume of $100,000 or below has experienced a significant contraction during the same period. After peaking at a relative dominance of 34% in December 2022, this group has seen a structural decline in its share of total transfer volume, currently standing at just 11%.

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

$0 to $1,000: 3.9% to 0.9%

$1,000 to $10,000: 8.4% to 2.1%

$10,000 to $100,000: 21.4% to 7.9%

On-chain fees are at historical lows

For years, Bitcoin transaction fees have been influenced by technological upgrades and shifts in usage patterns. The introduction of SegWit reduced the effective size of transactions, offering fee discounts; while centralized exchanges' batch processing has become standard practice in the industry, further enhancing efficiency by consolidating multiple withdrawals into a single transaction. Recently, the embedding of arbitrary data into the blockchain through inscriptions and runes has caused periodic spikes in fees, often leading to network congestion.

Historically, on-chain fees have been a reliable indicator of network demand. When block space is limited relative to overall transaction demand, fee pressure can spike sharply. In high-pressure environments, limited block space forces users to compete for transaction inclusion and ordering, with fees acting as a pressure relief valve. Therefore, rising fees often indicate increased demand for block space, signaling heightened user activity and speculative interest.

However, in recent months, miners' transaction fee revenue has significantly declined, averaging only $558,000 per day last month. This subdued fee pressure indicates a significant decrease in demand for block space, sending a similar signal as the overall reduction in trading volume.

Fee Revenue Multiple (FRM) refers to the ratio of total miner rewards (block subsidies and transaction fees) to total fee amounts. This ratio helps to understand the composition and share of miner income.

During previous bull markets, and typically during the formation of historical highs, this ratio tends to decline, and as network activity increases and transaction demand rises, fee pressure also tends to spike.

However, the current cycle presents a rather unique market structure. Although Bitcoin's trading price is slightly below its historical high, the FRM ratio remains exceptionally high. This discrepancy highlights that current fee pressure is relatively low, indicating that on-chain activity is surprisingly calm, especially in a market where trading prices are near historical highs.

Increase in off-chain trading volume

The Bitcoin economy consists of both on-chain and off-chain components, each playing a critical role in the asset's market dynamics. As the consensus around Bitcoin strengthens and the range of available financial instruments expands, the influence of centralized exchanges is growing. These platforms facilitate most trading activity and have become key venues for price discovery.

Thus, assessing the off-chain activity of exchanges is crucial for building an overall view of the Bitcoin ecosystem's activity.

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

In the derivatives market, perpetual contracts and calendar contracts have the highest trading volume, often exceeding on-chain, spot, and options trading volumes by an order of magnitude.

During this cycle, trading activity in futures contracts has surged, with an average daily trading volume of $57 billion over the past year. Moreover, in November 2024, futures trading volume reached an astonishing peak of $122 billion per day. The scale of trading volume in the futures market highlights the dominant position of these tools for speculators, traders, and hedgers.

Additionally, options trading volume has surged significantly during this cycle, averaging $2.4 billion in daily trading volume over the past year, peaking at $5 billion. This surge underscores the increasing use of options contracts by mature market participants, as investors are increasingly leveraging 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 activity, with an increasing amount of trading volume moving from Bitcoin's underlying to off-chain trading platforms. When comparing off-chain trading volume (spot, futures, and options) to on-chain settlement value, we note that off-chain trading volume is usually 7 to 16 times that of on-chain trading volume.

This transition may significantly affect how we interpret network metrics, as traditional indicators may no longer fully reflect market activity. However, the on-chain market remains at the core of the Bitcoin economy and constitutes the foundational layer for the operation of the 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 critical role in market structure and capital flows.

Leverage accumulation

Now that we have established the growing presence of derivatives in the Bitcoin ecosystem, we will turn our attention to the open interest in futures and options contracts to assess the accumulation of market leverage.

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

When evaluating the 30-day change in total open interest, we observe that the volatility has been accelerating. Throughout 2023, changes in open interest were relatively mild; however, with the launch of the U.S. spot ETF in January 2024, these fluctuations began to intensify.

The increase in open interest volatility marks a broader market transformation, shifting from a market structure primarily driven by spot activity to one dominated by derivatives. This transition raises the risk of cascading liquidations and contributes to a more unstable and reflexive market environment.

To quantify the accumulation of leverage, we calculated the realized market value leverage ratio, which compares total open interest with Bitcoin's realized market value (i.e., the total value stored on the network). A significantly positive deviation in this ratio indicates that speculative activity in the derivatives market has increased relative to the underlying scale of the asset, suggesting rising leverage and potential vulnerabilities in market structure. Conversely, a contraction in this ratio indicates that a deleveraging phase is underway.

The current leverage ratio remains as high as 10.2%, with only 182 out of 1,679 trading days (10.8%) experiencing leverage above this level. This underscores the substantial rise in market leverage and further reinforces the increasing dominance of derivatives in shaping the current market landscape.

However, since traders can choose stablecoin margin or cryptocurrency margin as collateral, the collateral structure for open interest is not uniform. Stablecoin margin positions are more conservative, being pegged to the dollar; whereas cryptocurrency margin positions introduce additional volatility, as the underlying collateral's value fluctuates with the market.

To assess the overall health of the derivatives market's collateral structure, we calculated the actual market value leverage ratio for both stablecoin and cryptocurrency collateral in open interest contracts. During the 2018-2021 cycle, cryptocurrency collateral was the preferred choice for investors. Combined with the widespread use of 100x leverage, this structurally weaker collateral base exacerbated the market downturn 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 interest. This shift highlights the growing maturity of the derivatives system around digital assets and the movement towards more stable risk management practices.

Conclusion

Despite the rise in Bitcoin prices, there has been a notable divergence between market valuations and network activity, with transaction counts remaining abnormally low, primarily due to a sharp decline in non-token transactions. The drop in throughput has led to a substantial decrease in miner fee revenue, contrasting sharply with previous bull market cycles, where price increases typically resulted in network congestion and surging fees.

Nevertheless, the settlement volume of the network remains quite substantial, with an average daily settlement amount reaching $7.5 billion. The lower number of transactions and higher throughput indicate that larger entities are increasingly dominating on-chain activity. Additionally, off-chain trading platforms have also experienced strong growth, with total trading volume for spot, futures, and options typically being 7 to 16 times higher than on-chain settlement volume.

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

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