by Martin Gaspar

On-chain activity

One thing to keep an eye on when considering Bitcoin’s price is the level of on-chain activity, as this paints a picture of the usage of BTC and can reflect whether bullish or bearish price action is reflective of user behavior. Today, Bitcoin is often considered as a store of value or as a method of payment. It is important to consider metrics with these use cases in mind.

Active entities – senders & receivers

The number of active entities, defined as unique entities that were active either as a sender or receiver, continue to march higher on a rolling 30D basis, according to data from Glassnode. This metric is a good proxy for the number of people transacting with BTC, given that holders tend not to move or spend their coins. It tells us that users are either returning or being onboarded into the Bitcoin ecosystem. Moreover, the fact that we are trending higher despite prices remaining above $60,000 in recent weeks suggests that these prices partly reflect increasing user activity.

Bitcoin addresses tick up

The number of Bitcoin addresses with a non-zero balance is also beginning to tick up on a 7D basis after pulling back from September levels and has been rising since mid-October. This metric is a good proxy for overall Bitcoin users on-chain, as it captures holders that do not spend or move their BTC. As of November 2, 2021, this figure remains roughly 1% below its April 2021 all-time highs.

Bitcoin transaction fees

These two metrics suggest upward momentum, but interestingly Bitcoin transaction fees remain relatively low. According to data from Glassnode, these have averaged around the equivalent of $3.00 in recent days, which compares to fees that were the equivalent of tens of dollars earlier this year. Bitcoin’s mempool remains relatively uncongested relative to past price run ups, which is keeping these fees down. So, while there may not be a stampede of users rushing to transact on BTC yet, it’s clear that user activity is picking up – we could well be back to much higher transaction fees later this quarter if these trends continue.

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CrossTower Inc. provides this content for general information purposes, to better inform you on your digital asset investment journey. We do not provide investment recommendations or provide tax advice. Please consult your investment professional or tax advisor if you require assistance in these areas.

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