Bitcoin (BTC) blocks stay mostly empty, signalling supply crunch despite the price crash

Bitcoin (BTC) is hardly moving from wallets, carrying 1-2 transactions per block or even empty blocks. The network has the lowest activity since 2022 as owners shift to long-term holding. 

Bitcoin (BTC) hardly moved actual coins despite the rapid price drawdown to $92,000. During that time, the Bitcoin network produced a series of empty blocks, only containing the block reward transactions. The empty mempool and blocks with few transactions started in the past two days, recalling the low transaction levels that extended into the 2022 and 2023 bear markets. 

Hours later, Bitcoin carries 1-2 transactions in most blocks, leading to an almost empty mempool. The recent price moves have not caused a rush to move and sell coins in panic, as most holders are still in the money or have no intention to sell during a minor drawdown. During past bull markets, on-chain activity and transaction count were usually seen as a sign of market strength. 

BTC daily transactions are still over 380K in 24 hours, though close to the lower range for the past 12 months. Over time, BTC daily transfer volumes slid under $1B per day despite the occasional whale transaction. 

Both whales and retail are more strategic with their selling, meaning fewer waves of transfers during market rallies or drawdowns. In comparison, stablecoins carry up to $345B in daily transfer value, fully displacing BTC as a tool for moving funds. BTC is also considered too valuable and risky to move, especially for whale-sized transactions.

The relatively low movement of funds is also seen as a sign that most holders are not used to moving BTC often, as during past bull markets. Even newer investors see BTC as a long-term store of value, not using it for payments or peer-to-peer transfers. 

As a result, the Bitcoin average transaction fee is down to $1.18, with no signs of congestion. Transactions from Ordinals or Runes are also negligible, as this type of asset was largely forgotten. The Bitcoin chain still carries relatively small transactions of a few hundred dollars. 

The empty mempool does not mean all blocks are entirely empty, though a few were mined with no transactions. The low queue in the mempool means all transactions are included immediately in the next block, with minimal waiting times. Currently, Bitcoin’s network is used for simple coin movements, with almost no activity tied to Runes, BRC-20 tokens, or more complex transactions. 

Wrapped BTC (WBTC), on the other hand, is actively transacted almost every second, fulfilling its role within the Ethereum DeFi ecosystem. BTC can also hypothetically move through L2 chains, though those chains still control a very small part of the coin supply. Babylon Labs is still the biggest program for non-custodial BTC staking, now holding $5.27B in value locked. 

The slow transaction count also coincides with an ever-sliding supply of BTC on exchanges. Centralized markets hold 2.32M BTC, with constant outflows in the past months. Miner reserves also inched up, remaining at 1.8M BTC. 

In terms of holders, newer cohorts are retaining the recently bought coins, while whales that held over 5-7 years have divested some of their holdings. 

Will Bitcoin mining be sustainable?

Using Bitcoin’s network only for minimal transactions raises the question of the fate of miners during the next block reward halvings. Over time, mining may rely on transaction fees to be sustainable, due to the low block reward. 

Even if BTC rallies during every halving, transaction fees are not enough to support the network. Transaction fees are only meaningful when blocks become competitive and require a bigger payment for including transactions. 

Even with an empty mempool, some mining facilities are sustainable. The Bitcoin hashrate is at an all-time high as miners still compete for the relatively high block reward. Despite this, the recent slow transactions show that BTC may not be sustainable as ‘digital gold’ if miners cannot break even on either fees or block rewards. 

Some of the traffic from BTC moved onto the Lightning network, along with other L2 solutions or wrapped tokens. BTC, as a base layer, could start receiving fees from its L2 chains or other projects, following the model of Ethereum.

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