Bitcoin on-chain user evaporation reaches 30%, ETFs lose $4.5 billion: what is the outlook for the next three months?

Author: Oluwapelumi Adejumo

Translation: Deep潮 TechFlow

Deep潮 Guide: Trading volume hasn’t collapsed, but active addresses have been shrinking for six months, dropping to a five-year low. This divergence—“apparent prosperity, internal emptiness”—is a sign of structural health issues in a bull market.

The article cross-validates data from Glassnode, Santiment, and CryptoQuant, proposing three future scenarios that serve as a reference framework for current BTC trend analysis.

Full text below:

Bitcoin’s network activity has been weakening for six consecutive months, but this trend isn’t reflected in many traders’ primary focus indicators.

A clearer signal isn’t trading volume—since it remains relatively stable—but participation breadth. Even if the network continues processing a similar number of transactions, the number of on-chain active addresses is steadily declining.

In a market where price discovery increasingly occurs through ETFs and derivatives, this divergence is critical. It indicates that Bitcoin’s on-chain footprint is narrowing, while market exposure remains active elsewhere.

As the bear market persists, this trend has become harder to ignore.

Glassnode data shows that in mid-August 2025, the 8-day moving average of active addresses was about 778,680. As of February 23, this number had fallen to approximately 535,942, a decline of about 31%.

CryptoQuant has also marked low network activity for six consecutive months, describing the current phase as a sustained period of on-chain participation fatigue.

Bitcoin Active Addresses Momentum

Source: CryptoQuant

The last time a similar pattern appeared was in 2024—after which Bitcoin experienced roughly a 30% correction.

This doesn’t mean it will necessarily repeat now, but it reinforces a historical pattern: prolonged network weakness often coincides with phases of waning market confidence.

Breadth declines, but throughput remains stable

Bitcoin’s transaction count hasn’t declined in tandem with active addresses.

In mid-August 2025, the average daily transaction count was about 444,000. Blockchain.com data shows that over the past 30 days, the daily average was around 439,000.

Intraday data still fluctuates—from about 289,000 to 702,000 transactions—but the overall throughput trend hasn’t collapsed.

This divergence is key to understanding the current situation.

If transaction volume remains stable while active addresses decrease, it suggests fewer entities are handling the same amount of on-chain activity.

There are various reasons for this, none of which require retail investors to flood in. Exchanges and custodians can batch process withdrawals; large holders can consolidate transfers; institutional funds can operate through fewer wallets; operational activities may cause short-term spikes in transaction counts without reflecting genuine user return.

The result is: the network appears busy on-chain, but the underlying participants are decreasing.

That’s why a decline in participation breadth is more telling than raw throughput. Stable transaction counts might mask a market increasingly concentrated among repeat traders, large institutions, and operational funds.

In this scenario, Bitcoin’s chain still functions normally, but the user participation breadth it represents is no longer truly representative.

Blockchain analytics firm Santiment offers a more straightforward description over a longer timeframe.

The firm states that since February 2021, the number of unique addresses initiating transactions has decreased by 42%, and new addresses have decreased by 47%.

Santiment doesn’t interpret this as evidence that crypto is dead or that a multi-year bear market is locked in, but it does describe a bearish divergence persisting through 2025—market cap rising while Bitcoin’s utility metrics weaken.

This tension is now reflected in the six-month trend. Prices and market narratives can continue, but the chain itself is becoming increasingly quiet.

Low fees indicate shrinking demand for block space

Fee data further confirms that Bitcoin Layer 1 is experiencing weak demand.

Mempool.space data shows that recent average transaction fees are around $0.24, approximately 1.8 sats/vB.

For a network that previously saw sustained competition for block space during peak cycles, this is a low level. Based on current transaction pace, this fee level implies daily fee revenue of less than $100,000.

In comparison, block subsidies are still about 450 BTC per day, making fee revenue a tiny fraction.

Bitcoin Average Block Fees

Source: Mempool.space

This isn’t an immediate security concern, nor does it suggest Bitcoin’s security model is under recent pressure.

Because block subsidies still dominate miner revenue, the network remains secure. But it does point to a long-term reality that Bitcoin has yet to face in this cycle.

The topic of transitioning to a fee-supported security budget recurs each cycle, but in the current environment, this transition isn’t being tested—since fee demand is weak.

In practice, the quiet fee market continues to delay this discussion.

The chain isn’t under persistent congestion, and users aren’t fiercely bidding for block space. This situation could change rapidly during volatility, speculative surges, or new demand shocks, but so far, it hasn’t.

Currently, block space is significantly underutilized compared to previous bull markets, aligning with the broader decline in participation breadth.

Bitcoin’s Empty Mempool

Source: Mononaut

CryptoQuant’s assessment aligns with this fee environment—low network activity generally correlates with decreased market interest and periods of overall loss.

When interest wanes, new participants decline, self-initiated transfers decrease, and fee pressure diminishes.

Bitcoin can still be actively traded as a financial asset, but the chain no longer reflects broad user engagement.

Macroeconomic environment and ETF capital flows are changing Bitcoin’s trading dynamics

The macro context helps explain why this trend persists.

Bitcoin is increasingly resembling a high-beta asset sensitive to macro factors, especially during risk-averse periods.

Over the past year, US inflation has cooled, with January 2026 CPI YoY at 2.4%; the Federal Reserve’s target rate range was cited as 3.50% to 3.75% at the end of January.

In a simpler market environment, cooling inflation might support a clearer rebound in risk assets.

However, market focus is on multiple volatility catalysts—including uncertainty around tariffs. This drives sharp swings in interest rates and the dollar, keeping overall risk appetite unstable.

In this environment, retail and institutional investors tend to reduce trading frequency. Retail participation declines, traders turn over less. Institutions can maintain exposure but prefer to adjust positions through products that don’t require on-chain transfers.

This explains why spot Bitcoin ETFs have become a key narrative.

Coinperps data shows that US Bitcoin ETFs have experienced net outflows for several consecutive weeks, with about $3.8 billion net outflow over the past five weeks and approximately $4.5 billion outflow since the start of the year.

2026 US Bitcoin ETF Daily Capital Flows

Source: Coinperps

This shifts activity from self-custody wallets to broker accounts.

It also explains why markets can remain active while the chain becomes quieter. Exposure is still changing hands, but more trading is happening off-chain.

This marks an important shift in Bitcoin’s role. It increasingly resembles a financial product with an institutional shell, while Layer 1 is used more selectively for settlement, storage, and periodic transfers.

Meanwhile, daily transactional energy in the crypto space is flowing elsewhere, especially into stablecoins.

Coin Metrics lists stablecoins as a core driver of on-chain activity, with total stablecoin supply approaching $300 billion and trading volume continuing to rise.

If stablecoins on other chains take on more daily settlement demand, Bitcoin’s Layer 1 will naturally become more functionally limited.

This doesn’t weaken Bitcoin’s investment thesis per se, but it does change its form.

Three scenarios for the next three to six months

The current six-month decline in network breadth sets the stage for three possible future paths for Bitcoin.

First is continued apathy, which in a risk-averse market environment appears as the baseline scenario.

In this scenario, active addresses remain low (between 450,000 and 600,000), transaction counts fluctuate but don’t collapse, fees stay low, and ETF capital flows remain steady or slightly negative.

Here, Bitcoin could still experience sharp swings driven by macro headlines, but on-chain participation won’t confirm a broad recovery. The asset’s trading logic becomes more macro-driven than network-driven, not entering a new expansion phase.

Second is liquidity thawing, a more optimistic path.

If inflation continues to cool and easing expectations stabilize risk appetite, ETF capital flows might shift from net outflows to sustained net inflows. In this environment, growth in active addresses would be a key confirmation signal.

A rebound to 650,000–800,000 active addresses would indicate participation breadth is recovering, not just price momentum. This looks more like a classic cyclical recovery—price rises supported by increased on-chain user engagement.

Third is a structural substitution scenario, perhaps the most noteworthy.

In this case, Bitcoin’s price rises, but on-chain breadth remains subdued. ETFs, derivatives, and custodial settlements continue to dominate, while stablecoins handle more daily transaction needs elsewhere in crypto.

Here, Bitcoin increasingly resembles a digital macro asset and settlement layer rather than a chain with broad retail activity.

This scenario would mark a deep transformation in Bitcoin’s role, reflecting fundamental changes compared to years past.