ETF outflows of $4.5 billion: Will BTC continue to decline by another 30% in the next three months?

Trading volume has not collapsed, but active addresses have been continuously shrinking over the past six months, dropping to a five-year low. This divergence—“apparent prosperity, internal emptiness”—is a negative signal indicating a structurally unhealthy bull market.

Using cross-validation from Glassnode, Santiment, and CryptoQuant data, three future scenarios are proposed as a reference framework for assessing BTC trends in the current environment.

Full text below:

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

A clearer signal is not 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 weakness.

Bitcoin Active Addresses Momentum, Source: CryptoQuant

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

This does not 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 has not declined in tandem with active addresses.

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

Daily data still fluctuates—from about 289,000 to 702,000 transactions—but the overall throughput trend has not 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 re-engagement.

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

This is why breadth decline is a more meaningful indicator than raw throughput. Stable transaction counts may mask a market increasingly dominated by repeat traders, large institutions, and operational fund flows.

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

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 the number of new addresses has decreased by 47%.

Santiment does not 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 spanning into 2025—market cap rising while Bitcoin’s utility metrics weaken.

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

Low fees point to 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 still amount to about 450 BTC per day, with fee revenue representing a tiny fraction.

Bitcoin Average Block Fees, Source: Mempool.space

This is not 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 points to a long-term reality that Bitcoin has yet to face in this cycle.

The topic of transitioning to a fee-dependent security budget recurs each cycle, but in the current environment, this transition is not being tested—because fee demand itself is weak.

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

The chain is not under persistent congestion, and users are not fiercely bidding for inclusion. This situation could change rapidly during volatility, speculative surges, or new demand shocks, but so far, it has not.

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 decrease, self-initiated transfers decline, 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 shifting Bitcoin’s trading patterns

The macro backdrop helps explain why this trend persists.

Bitcoin is increasingly acting as a high-beta asset sensitive to macroeconomic 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 activity. Retail participation declines, traders turn over less. Institutions can maintain exposure but prefer to adjust positions through products that do not require on-chain transfers.

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

Data from Coinperps shows that US Bitcoin ETF net outflows have continued for several weeks, with about $3.8 billion outflow over the past five weeks and roughly $4.5 billion since the start of the year.

Daily capital flows into US Bitcoin ETFs in 2026, Source: Coinperps

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

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

This marks an important shift in Bitcoin’s role. It increasingly resembles a financial product with an institutional veneer, while Layer 1 is more selectively used 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 does not 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 paths for Bitcoin’s future.

The 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 do not collapse, fees stay low, and ETF capital flows remain steady or slightly negative.

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

The second is liquidity thawing, a more optimistic path.

If inflation continues to cool and easing expectations stabilize risk appetite, ETF capital flows could 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 increasing on-chain user engagement.

The 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 of the daily transaction demand 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 evolution in Bitcoin’s role, reflecting fundamental changes compared to years past.