Original author: UkuriaOC, CryptoVizArt, Glassnode
Original translation: AididiaoJP, Foresight News
summary
The number of on-chain transactions has decreased, but the settlement volume has increased, indicating that usage by large entities has increased. Although the number of transactions has decreased, the average transaction size has increased significantly, indicating that institutions or high net worth participants are dominating on-chain activity.
Even as Bitcoin trades near all-time highs, on-chain fees remain subdued and demand for block space remains minimal. This is a significant departure from previous cycles, where price increases were often accompanied by fee spikes due to increased congestion and network usage.
Trading activity is increasingly moving off-chain, with centralized exchanges now accounting for the majority of trading volume, especially in the futures market. It is worth noting that the total trading volume of spot, futures and options is typically 7 to 16 times higher than the on-chain settlement volume.
Leverage continues to accumulate, with total futures and options open interest reaching $96.2 billion. The collateral structure has improved significantly, with stablecoin margin positions now accounting for the majority of open interest.
Ghost Town on Chain
Bitcoin is currently holding above the psychologically important $100,000 mark, just 6% away from its all-time high of $111,700. One might expect that on-chain activity on the Bitcoin network would be equally active, but there is a clear divergence: the spot price remains high, while network activity is unusually quiet.
To assess this disconnect, we first analyzed the number of transactions settled daily on the Bitcoin network. Between 2023 and 2024, the number of transactions showed a structural upward trend, peaking at 734,000 per day. Since the beginning of 2025, throughput has declined significantly, with daily transactions ranging between 320,000 and 500,000, a significant contraction from the highs earlier in this cycle.
To better understand the nature of Bitcoin network activity, we can divide transactions into two categories:
Token transactions involve value transfer.
Non-token transactions, such as those related to inscriptions and runes, embed arbitrary data via the Taproot witness data and OP_RETURN fields, respectively.
The number of token transactions has remained relatively stable over the past year, indicating a stable base of value transfer activity. Non-token transactions, on the other hand, have shown a more volatile pattern. Between July and December 2024, non-token transaction demand surged, significantly increasing the total volume of transactions. However, since the beginning of 2025, non-blockchain transaction activity has fallen significantly, contributing significantly to the recent contraction in overall network throughput.
Trading volumes remain strong
Despite the decline in transaction numbers, the economic volume settled on the Bitcoin network remains at historically high levels, averaging $7.5 billion per day and peaking at $16 billion during the historic price breakout of $100,000 last November.
The average transaction value per transaction is currently $36,200, indicating that while the volume has decreased, the value of each transaction is still significant. This trend suggests that larger entities are continuing to use the Bitcoin network, and that the throughput per transaction is still increasing even if the overall volume of transactions has decreased.
To test the hypothesis that large entities are increasingly using the Bitcoin network to transfer value, we can analyze settlement volume by transaction size. Transactions over $100,000 show a clear structural dominance, accounting for 66% of network volume in November 2022 and currently rising to 89%. This trend reinforces the view that high-value participants are increasingly dominating on-chain activity.
In contrast, transactions of $100,000 or less have experienced a significant contraction during the same period. After reaching a peak of 34% relative dominance in December 2022, this group’s share of total transfer volume has structurally declined and now stands at just 11%.
A more detailed breakdown of the various subgroups shows that the trend is consistent across the board, with each group experiencing a significant decline in their share of network capacity.
$0-1000: 3.9% to 0.9%
$1,000-$10,000: 8.4% to 2.1%
$10,000 to $100,000: 21.4% to 7.9%
On-chain fees are at historic lows
Bitcoin transaction fees have been impacted over the years by technology upgrades and shifting usage patterns. The introduction of SegWit reduced the actual size of transactions, providing fee discounts, while centralized exchange batching has become an industry standard, further improving efficiency by combining multiple withdrawals into a single transaction. More recently, Inscriptions and Runes, which embed arbitrary data into the blockchain, have caused periodic fee spikes and often caused network congestion.
Historically, on-chain fees have been a reliable indicator of network demand, with fee pressure rising sharply when block space is small relative to overall transaction demand. In high-pressure environments, where limited block space forces users to compete for the packaging and ordering of transactions, fees themselves act as a pressure relief valve. Rising fees therefore typically indicate increased demand for block space, signaling a rise in user activity and speculative interest.
However, in the past few months, miners’ transaction fee revenue has fallen sharply, averaging just $558,000 per day last month. This lackluster fee pressure indicates a significant drop in demand for block space, which sends a similar signal to the overall drop in transaction volume.
The Fee Revenue Multiple (FRM) is the ratio of total miner rewards (block subsidies and transaction fees) to total fees. This ratio helps understand the composition and proportion of miner revenue.
During previous bull runs, and often during the formation of all-time highs, this ratio tends to decline, with fee pressure surging as network activity increases and demand for transaction inclusion grows.
However, the current cycle presents a rather unique market structure, with the FRM ratio remaining unusually high despite Bitcoin trading slightly below its all-time high. This discrepancy highlights that fee pressure is relatively low at the moment, indicating that on-chain activity is surprisingly quiet, especially in a market trading near all-time highs.
Off-chain transaction volume increases
The Bitcoin economy consists of two parts, on-chain and off-chain, each of which plays a crucial role in the market dynamics of this asset. As Bitcoins consensus continues to grow and the range of available financial instruments expands, the influence of centralized exchanges has increased. These platforms facilitate the majority of trading activities and serve as a key venue for price discovery.
Assessing off-chain activity on exchanges is therefore critical to building a holistic view of Bitcoin ecosystem activity.
Starting with the spot markets, trading activity on centralized exchanges has remained strong over the past year, averaging $10 billion per day and peaking at $23 billion in November 2024. Notably, spot volumes of this magnitude are often comparable to daily on-chain settled volumes, highlighting the parallel scale of activity between spot markets and base layer networks.
In the derivatives market, futures volumes for perpetual and calendar contracts are the largest by volume and are often an order of magnitude larger than on-chain, spot, and options volumes.
Trading activity in futures contracts has grown significantly over this cycle, averaging $57 billion per day over the past year, and reaching an astonishing peak of $122 billion per day in November 2024. The scale of futures market trading highlights the dominance of these instruments for speculators, traders, and hedgers.
Additionally, options trading volumes have risen significantly during this cycle, averaging $2.4 billion per day and peaking at $5 billion over the past year. This surge highlights the growing use of options contracts by sophisticated market participants, as investors increasingly use options to implement advanced risk management strategies and fine-tune their market exposure.
The growth in spot and derivatives volumes highlights a shift in trading activity, with more and more volume moving off-chain from Bitcoin to off-chain trading platforms. When comparing off-chain volume (spot, futures, and options) to network-settled value, we note that off-chain volume is typically 7 to 16 times larger than on-chain volume.
This shift could significantly impact how we interpret network metrics, as traditional metrics may no longer fully reflect market activity. However, on-chain markets remain core to the Bitcoin economy and form the base layer for the operation of the broader ecosystem. Deposits and withdrawals are the primary link between off-chain platforms and the Bitcoin network, and on-chain activity will likely continue to play a vital role in market structure and capital flows.
Leverage Accumulation
Now that we have established that derivatives are growing in the Bitcoin ecosystem, we will now turn our attention to open interest in futures and options contracts to assess the accumulation of market leverage.
Both markets experienced significant growth in open interest (OI), with futures OI increasing from $7.7 billion to $52.8 billion and options OI increasing from $3.2 billion to $43.4 billion. Total derivatives OI peaked at $114 billion and remains high at around $96.2 billion. This continued expansion reflects the significant increase in leverage in the Bitcoin economy, which could exacerbate the risk of price volatility.
When evaluating the changes in 30-day total open interest, we observe that the amplitude of the movements has been accelerating. Throughout 2023, the changes in open interest were relatively flat, however, with the launch of the US cash ETF in January 2024, these movements began to intensify.
The increase in open interest volatility signals a broader market transition from a structure driven primarily by spot activity to one dominated by derivatives. This shift increases the risk of cascading liquidations and leads to a more volatile, reflexive market environment.
To quantify the accumulation of leverage, we calculate the realized market capitalization leverage ratio, which compares total open interest to Bitcoins realized market capitalization (i.e., the total USD value stored on the network). A significant positive deviation in this ratio indicates that speculative activity in the derivatives market has increased relative to the underlying size of the asset, indicating an increase in leverage and possible fragility in the market structure. Conversely, a contraction in the ratio suggests that a deleveraging phase is underway.
The current leverage ratio is still high at 10.2%, and only 182 trading days (10.8%) out of 1,679 trading days had a leverage ratio above this level. This highlights the sharp increase in market leverage and further reinforces the growing dominance of derivatives in shaping the current market landscape.
However, the collateral structure of open interest is not uniform as traders can choose between stablecoin margin or crypto margin as collateral. Stablecoin margin positions are more conservative with collateral pegged to the U.S. dollar, while crypto margin positions introduce additional volatility to trading as the value of the underlying collateral itself fluctuates with the broader market.
To assess the overall health of the collateral structure in the derivatives market, we calculated the realized market value leverage ratio of stablecoin margin and cryptocurrency margin open interest separately. In the 2018-2021 cycle, cryptocurrency margin collateral was the preferred choice of investors. Coupled with the widespread use of 100x leverage, this structurally weak collateral base exacerbated the market decline in May 2021.
Since the high-profile collapse of FTX, stablecoin margin collateral has become the dominant form of margin, now accounting for the majority of open interest collateral. This shift highlights the growing maturity of the derivatives ecosystem around digital assets and the move toward more stable risk management practices.
in conclusion
Despite the rise in Bitcoin prices, there has been a clear divergence between market valuations and network activity, with transaction counts remaining unusually low, primarily due to a sharp drop in non-token transactions. The decline in throughput has led to a sharp drop in miner fee revenue, in stark contrast to previous bull cycles, where price increases typically led to network congestion and soaring fees.
Despite this, the networks settlement volume is still considerable, with an average daily settlement amount of up to $7.5 billion. The lower number of transactions and higher transaction throughput indicate that large entities are increasingly dominating on-chain activities. In addition, the trading volume of off-chain trading platforms has also achieved strong growth, and the total trading volume of spot, futures and options is generally 7 to 16 times higher than the on-chain settlement volume.
Leverage in derivatives markets continues to rise, with total futures and options open interest remaining at an all-time high of $96.2 billion. However, the composition of the underlying collateral structure has improved significantly, with stablecoin margin positions now accounting for the majority of open interest. This shift highlights the growing maturity of the derivatives ecosystem around digital assets and the move toward more robust risk management practices.
