Glassnode, a leading on-chain analytics firm, has shed light on the true nature of Bitcoin transactions and how much of the total accumulated Bitcoin volume represents ‘real’ economic activity.
Entity-Adjusted Perspective on Bitcoin Volume
In their recent weekly discussion, Glassnode explored the essential metrics of the Bitcoin network following the cryptocurrency reaching the significant $100,000 mark.
One crucial metric is the “Transfer Volume”—the total Bitcoin amount involved in blockchain transactions on a daily basis. The accompanying chart displays how this metric has changed throughout Bitcoin’s history.
[Image of Bitcoin Transfer Volume chart]
According to the chart, the cumulative Bitcoin Transfer Volume, depicted in green, soared during the last cycle but has shown a slower growth rate in the current cycle. Nevertheless, it has now surpassed an astounding $131 trillion.
It’s important to note that these volume figures are calculated using the USD value at the transaction time rather than converting the total BTC volume to dollars based on current exchange rates.
Glassnode also provided insights on the Entity-Adjusted Transfer Volume, which calculates transactions specifically between different entities. An ‘entity’ is identified as a collection of addresses owned by the same investor. Transfers within the same holder’s addresses don’t impact the broader market, so this adjustment provides a truer picture of trading activity.
Glassnode reports, “After applying entity adjustment, the refined transfer volume is $11.63 trillion, which is just 8.86% of the total.” This suggests that less than 9% of Bitcoin’s total volume pertains to economically meaningful transfers.
Does this imply that most Bitcoin transactions are not genuine? It depends on what we consider ‘real’ activity. If the measure is purely the count of transactions rather than their dollar value, the network tells a different story.
Further data from the same report show the cumulative Transaction Count for Bitcoin, comparing both the unfiltered and Entity-Adjusted versions:
[Image of Bitcoin Transaction Count chart]
The graph reveals that, although the total Transaction Count remains higher, it doesn’t differ dramatically from the Entity-Adjusted count.
This indicates that only 8.8% of the Transfer Volume encompasses the 840 million transfers between different entities. The inflated volume seems largely due to centralized exchanges internally managing vast amounts of Bitcoin, which artificially increases their reported volume.
While these transfers might not influence Bitcoin’s price directly, they are indeed genuine transactions from a network perspective, contributing visibly to miner fees.
Bitcoin Price Movement
As of now, Bitcoin trades near $101,100, marking a nearly 2% decline over the past week.
[Image of Bitcoin Price Chart]
The recent upward movement over the last two days is quite apparent.
Images credit to Dall-E, data courtesy of Glassnode.com and TradingView.com
