The circulation speed of Bitcoin has reached a ten-year low, not as a warning sign but as a symbol of maturity. Its use has shifted from currency to long-term asset, reflecting the growth of institutional adoption and off-chain activities. This article is sourced from an article by Stefania Barbaglio, published by Coindesk, and organized, translated, and written by Shaw Gold Finance. (Background: Uncovering the founder of Pantera Capital: The legend of buying Bitcoin at $65 for a thousand times return) (Context: Helping whales offload 80,000 Bitcoins, why Galaxy Digital is the most knowledgeable crypto institution on Wall Street?) The on-chain circulation speed of Bitcoin is at its lowest level in a decade, indicating that its use has shifted from currency to holding long-term assets. The rate of institutional adoption has increased, and the holdings of Bitcoin in Exchange-Traded Funds (ETFs) and corporate treasuries have significantly increased, thus reducing on-chain transactions. Off-chain activities, including the use of the Lightning Network and Wrapped Bitcoin, indicate that Bitcoin's economic activity is more active than on-chain metrics suggest. The on-chain transaction speed of Bitcoin (i.e., the circulation speed of Bitcoin) is at its lowest level in ten years. To some, this seems to be a dangerous signal: Has Bitcoin lost momentum? Is it still in use? In fact, the decline in circulation speed may be the clearest signal to date indicating that Bitcoin is maturing rather than stagnating. Bitcoin is no longer circulating like cash; instead, it is increasingly being held like gold. Functional Shift In traditional economics, circulation speed refers to the frequency with which currency changes hands; it is an indicator of economic activity. For Bitcoin, it tracks the frequency of Bitcoin transactions on-chain. In the early stages of Bitcoin's development, the circulation frequency was high due to traders, early adopters, and enthusiasts testing its use cases. During major bull markets in 2013, 2017, and 2021, trading activity surged, and Bitcoin flowed rapidly between wallets and exchanges. Today, the situation has changed. Over 70% of Bitcoin has not moved for more than a year. Trading activity has declined. At first glance, this seems to indicate a decrease in usage. But in reality, it reflects a different situation: steadfast confidence. Bitcoin is being viewed as a long-term asset rather than just a short-term currency. This shift has been largely driven by institutions. Institutional Adoption Leads to Supply Lock-Up Since the launch of the US spot Bitcoin ETF in 2024, institutional holdings have surged significantly. By mid-2025, spot ETFs held over 1.298 million Bitcoins, accounting for approximately 6.2% of the total circulating supply. When including corporate treasuries, private companies, and investment funds, the total institutional holdings amount to nearly 2.55 million Bitcoins, about 12.8% of all circulating Bitcoins. These assets largely remain unchanged and are stored in cold wallets as part of long-term strategies. Companies like Strategy and Tesla have not tapped into their Bitcoin but hold it as a strategic reserve. This is beneficial for scarcity and price but simultaneously reduces circulation speed: the amount of coins in circulation decreases, leading to fewer transactions on-chain. Off-Chain Usage is Rising and Harder to Detect It is important to note that on-chain circulation speed does not encompass all economic activities of Bitcoin. On-chain circulation speed can only explain part of the situation. Today, the true economic activities of Bitcoin are increasingly occurring off the base layer and beyond the scope of traditional measurement methods. Take the Lightning Network, for example; it is a second-layer scaling solution for Bitcoin that can completely bypass the main chain for fast, low-cost payments. From micro-payments for streaming to cross-border remittances, the Lightning Network allows Bitcoin to be used in everyday scenarios, but these transactions do not reflect in the circulation speed metric. As of mid-2025, the public capacity of the Lightning Network has surpassed 5,000 Bitcoins, growing nearly 400% since 2020. The growth of private channels and institutional experiments indicates that the actual numbers are much higher. Similarly, Wrapped Bitcoin (WBTC) enables Bitcoin to circulate on Ethereum and other chains, powering decentralized finance (DeFi) protocols and tokenized finance. In just the first half of 2025, the supply of WBTC grew by 34%, clearly indicating that Bitcoin is being used rather than idled. There are also custody issues: institutional wallets, ETF cold storage, and multisig financial tools allow companies to safely hold Bitcoin but usually do not transfer these coins. These coins may have significant economic implications but contribute nothing to on-chain transaction speed. In summary, Bitcoin's activity level may be higher than it appears on the surface, but this activity is happening outside traditional circulation speed metrics. Its utility is shifting to new levels and platforms—payment channels, smart contract systems, yield strategies—none of which are reflected in traditional circulation speed models. As Bitcoin evolves into a multi-layered monetary system, we may need new methods to measure its momentum. The decline in on-chain circulation speed does not necessarily mean that usage is decreasing. In fact, it may just mean that we've been looking in the wrong direction. Trade-Offs Behind Slow Transaction Speeds While slow transaction speeds indicate strong investor confidence and long-term holding, they also pose challenges. Decreased on-chain transactions mean reduced fees for miners: this has become an increasingly serious issue following the 2024 block reward halving. Bitcoin's long-term security model relies on a healthy fee market, which in turn requires sustained economic activity. Another issue is perception. In a network where few coins circulate, it may start to appear more like a static vault rather than an active market. This may reinforce the argument that Bitcoin is 'digital gold' but weaken its vision as a circulating currency. This is the core design contradiction: Bitcoin is intended to be both a store of value (digital gold) and a medium of exchange (peer-to-peer cash). But these two roles do not always align. Circulation speed is an indicator of this push and pull relationship, this ongoing struggle between value preservation and practicality, and how Bitcoin responds to this situation will not only influence its usage patterns but also determine its role within the broader financial system. A Sign of Maturity Ultimately, the decline in Bitcoin's circulation speed does not mean that its usage frequency is decreasing. It indicates that the way people use Bitcoin has changed. As the value of Bitcoin increases, people are more inclined to save it rather than spend it. With its widespread adoption, infrastructure is gradually shifting off-chain. And with the addition of institutions, their strategies are more focused on value preservation rather than circulation. The Bitcoin network is evolving. Circulation speed has not disappeared; it has simply become less active, reshaped by a changing user base and new levels of economic activity. If transaction speeds rise again, it could signal a resurgence in transactional usage; increased spending, faster capital flows, and higher retail participation. If transaction speeds remain sluggish, it suggests that Bitcoin's role as macro collateral has taken root. In either case, transaction speed provides a window into the future of Bitcoin. It is not just a currency for consumption but an asset that can be built upon.

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