Bitcoin’s on-chain transaction volume has been steadily increasing since June 2018 and has now reached levels mirroring January 2018 following a sharp decrease in the ensuing early months of 2018, according to data provided by Blockchain.com.
Increasing transaction volumes are a healthy sign for the Bitcoin network, especially considering the sharp decline after January 2018 that coincided with the start of the extended bear market. Daily transaction volume peaked to a nearly one-year high on February 6th, reaching roughly 353,000 transactions.
Caveats With Measuring On-Chain Transaction Volume
Although Bitcoin’s on-chain volume has been gradually increasing throughout mid-late 2018 and into 2019, there are some important qualifiers to take into account when measuring on-chain transaction volume.
In particular, CoinMetric’s ‘adjusted transaction volume’ (ATV) heuristic is designed to filter out non-meaningful economic transactions such as self-churns typical of mixers and exchanges. According to CoinMetrics, Bitcoin’s ATV (in USD) is still steadily declining despite the ascending trend of transactions over most of the last year.
CoinMetrics does not include ‘change outputs’ either in their ATV metric.
Despite this, a positive trend in transaction count is indicative of a healthier Bitcoin network than the lows of early 2018. Moreover, on-chain metrics do not account for Bitcoin’s Lightning Network (LN) — which has been rapidly snowballing over the last year.
Analysis by Casa Hodl CTO Jameson Lopp in January also sheds light how the network is becoming more efficient and has organically grown, citing lower transaction fees, broader SegWit adoption, and LN proliferation as vital signs for the legacy cryptocurrency.
Other Metrics Indicating Bitcoin’s Positive Health
Other metrics including Bitcoin’s growing LocalBitcoins exchange volume in areas of poor economic freedom and conditions are also positive gauges of Bitcoin’s value proposition. Nearly $3.1 billion in BTC was traded on LocalBitcoins in 2018 — a platform with high premiums — revealing that users in developing areas of the world are seeking out the legacy cryptocurrency for its inherent value rather than speculation.
Similarly, Bitcoin’s mining decentralization has notably become more diverse. Large mining pools control smaller shares of the network’s total hash power than in the past, and smaller mining pools are slowly gaining traction in the mining market.
The overall number of full Bitcoin clients has also leveled out since the beginning of the bear market and correlates to the number of full nodes near the height of the 2017 ICO craze and market bull run. Sustaining the number of full Bitcoin clients is vital to the long-term sustainability of the network and corresponds to network enhancements like SegWit that have made blocks more efficient and reduced the overall blockchain bloat of the network.
As 2019 continues, Bitcoin’s network metrics seem to be on pace to continue their positive trend, and the further adoption of the LN should only help to fuel the positive momentum more.