Bitcoin Network Activity Lows Spark Concern, Runes Usage Dips

Three weeks after its successful launch, the Runes protocol has seen a decline in its on-chain activity, with May 10 marking the lowest day.

According to data from Dune Analytics, the number of new mints reached 140, and the daily fee was around $4,500. At its peak on April 26, the number of new mints surpassed 23,000, and the fee hit around $321,200.

While still generating fees, it hasn’t surpassed $1 million for most of the past two weeks, The Block’s data shows. While BTC prices fell from all-time highs, they remain elevated based on past prices.

2 wallets that have been dormant for 10.7 years transferred all 1,000 $BTC($60.9M) out in the past 20 mins.

Wallet"16vRqA" received 500 $BTC($62K at that time) on Sept 13, 2013, when the price was $124.

Wallet"1DUJuH" received 500 $BTC($62K at that time) on Sept 12, 2013, when… pic.twitter.com/l5ivjrcRt5

— Lookonchain (@lookonchain) May 12, 2024

A Market Lull

Developed by Casey Rodamor, the head behind the Ordinals protocol, which caused a similar phenomenon one year ago, the Runes protocol is designed to enable users to create fungible tokens on the world’s largest cryptocurrency network. Ordinals, inscriptions, or Runes remind us of ERC-20 tokens on the Ethereum network.

Runes launched on Bitcoin’s halving day (April 19th) and saw a strong initial surge. In the first week, record fees were generated for Bitcoin miners, exceeding $135 million. At the time, the protocol shared the spotlight with the historical halving and even got more attention.

On April 23, Runes transactions accounted for 81% of the 926,642 transactions on the Bitcoin network, completely overtaking BRC-20 and Ordinals. As a result of this major surge, the protocol collected 64% of transaction fees, equivalent to $113 million in BTC.

Despite the ongoing slowdown, it’s too early to conclude that Rune is a failure. Several Runes collections have gained traction, with market cap reaching hundreds of millions of dollars. Plus, Runes’ inventor Rodarmor said at a recent Ordinals event that she is actively working on new projects.

The arrival of Runes is considered more efficient than the BRC20 standard. The protocol utilizes Bitcoin’s UTXO model and OP_RETURN opcode for tokenization.

Unlike Ethereum, with UTXOs, users don’t have a single token balance. Instead, each transaction combines tokens into outputs. Any unused tokens from these outputs become the user’s new UTXO balance and are returned to their wallet for spending in future transactions.

Bitcoin On-Chain Activity Hits Multi-Year Low

Runes’ activity slowdown comes amid Bitcoin’s network activity hitting the lowest in 5 years, as shown by data from Santiment. The decline suggests a drop in trader interest and potential market anxiety.

Meanwhile, the excitement surrounding spot Bitcoin exchange-traded funds (ETFs) appears to be fading. Trading volume is slowing down, with some funds experiencing outflows.

In last week’s trading session, Grayscale’s Bitcoin ETF, Grayscale Bitcoin Trust (GBTC) surprised the whole market as it saw first-time capital into the fund. However, the trend was not sustainable. After two days of recorded inflows, GBTC saw outflows return on Thursday and Friday.

Elsewhere, Bitcoin old whales made a move. Lookonchain’s data shows that two Bitcoin wallets, dormant for nearly 11 years, transferred a combined $60.9 million worth of BTC. Large transactions like these can influence the market.

Bitcoin’s (BTC) price has moved sideways since the fourth halving. According to CoinGecko’s data, BTC is currently valued at around $61,500, down 4% in the last 7 days.

The market is heading toward a new week with eyes set on the release of the US Consumer Price Index (CPI) on Wednesday. This data, a key indicator of US inflation, will largely impact financial markets. Inflation is an issue, and lower rates may not be coming any time soon.

A higher-than-forecast CPI reading will likely strengthen the US dollar, while a lower-than-forecast reading could weaken it. The estimated CPI is 3.4%, compared to last month’s 3.5%.

Another event to watch is the speech of US Federal Reserve (Fed) Chair Jerome Powell on Tuesday, which could showcase the Fed’s stance on interest rate decisions and monetary policy. The Fed is expected to keep rates on hold, despite serious inflation in the US economy.

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