Grayscale Fund, which won the lawsuit against the U.S. Securities and Exchange Commission in August, used a clever strategy of interest rate spreads to attract a large amount of financial institutions' funds to flow into the U.S. BTC market. In a few years, it has become the "fixing needle" in the BTC market. In early October, Grayscale noted in its monthly market report that Bitcoin performed strongly in September compared with traditional assets, highlighting the diversified nature of cryptocurrencies. The author also observed that the correlation between BTC and the S&P 500 has dropped to the level before 2020 and no longer has a significant statistical correlation. In addition, leading high-frequency quantitative funds such as Jump have reduced their operations in the market, and BTC seems to have entered a "vacuum" state again.
Additionally, the report highlights that strong fundamentals played a key role as Bitcoin’s on-chain metrics improved during the month. On-chain data has become an indispensable indicator for many giants in the industry. As the focus on on-chain data gradually increases, more and more companies and investors use it as an important reference for decision-making and investment. In this article, we will take a closer look at BTC based on the data on the OKLink chain.
01 BTC has market flexibility, but the on-chain data is not that optimistic
Overview of address changes: New addresses exceeded the Q3 monthly average by a slight advantage of 0.02%, and the number of active addresses increased by 7.24% in September
This year from January 1 to October 8, 2023, the number of addresses on the BTC chain increased from 1,070,107,188 to 1,199,213,543, achieving a growth rate of 12.06%. This shows that the Bitcoin network has attracted more users and participants this year, showing a continued growth trend.
In the data for the third quarter of 2023 (Q3), the new rate of Bitcoin addresses in September was 1.34%, exceeding the Q3 average monthly growth rate by only a slight margin of 0.02%.
Source: OKG Research, OKLink
In terms of active addresses, as Grayscale stated, there was an increase of 69,783 in September, an increase of 7.23%. But when it comes to October, since September 30 to the present (October 8), the number of active addresses has dropped by 160,275, a decrease of 15.50%.
After excluding zero assets, the number of addresses and the number of whale addresses both showed a downward trend in September.
After excluding zero assets, both the number of Bitcoin addresses and the number of whale addresses showed a downward trend in September. According to OKLink data statistics, after excluding zero-asset addresses, the number of Bitcoin addresses in September decreased by 24,817 compared with August. This is a poor performance compared with the number of new addresses in August of 456,217.
At the same time, in terms of whale addresses, there were 9 fewer addresses in September, compared with 10 new whale addresses in August. This means that in September, there was a certain decline in the number of Bitcoin addresses held by whales.
Comparing the performance of other L1 markets: BTC, which performs better in the number of daily active addresses, is not at the top of the industry. ETH is better than BTC in terms of new non-zero asset addresses.
Looking at the comparison of the entire industry, BTC, which has excellent performance in terms of the number of active addresses, ranks fourth in the industry, second only to Near.
Source: OKG Research, OKLink
ETH has been compared with BTC by the market. We can observe that ETH is slightly lower than BTC in terms of new addresses. However, when 0 asset addresses are excluded, compared with BTC, ETH has achieved significant growth in the number of addresses, while BTC showed a downward trend in September.
Source: OKG Research, OKLink
02 Ordinals and Inscriptions are the main reasons for the active ecology on the BTC chain
Since the end of last year, Bitcoin core contributor Casey Rodarmor created the Ordinals protocol, introducing the concepts of Ordinals (ordinals) and Inscriptions (inscriptions), thus giving birth to the first NFT on the Bitcoin network. On March 8, 2023, DOMO proposed using Ordinals inscriptions in JSON data format to implement token contract deployment, minting, and transfers. Since then, the BTC ecosystem has triggered heated discussions in the market.
Source: brc-20; Date: Oct 8, 2023
According to data from Mempool,Since February, the ecological demand for Bitcoin has been in short supply, which is the so-called "seller's market". The greater the number of unconfirmed transactions in Mempool, the more transactions are initiated and the higher the demand for on-chain usage. This high demand continues to this day and coincides with the release of Ordinals and Inscriptions.
Further,By comparing the analysis of transaction size and transaction number, we can observe that in September, the amount of each transaction was relatively small, that is, small-amount transactions were host. However, it can be initially seen from the chart that after September 23, the amount of each transaction began to show an increasing trend. One factor is that more investors may have more confidence in the BTC ecosystem and are willing to conduct large transactions, thereby driving the growth of each transaction amount.
Source: Glassnode
03 What the data on the chain gives us
By analyzing the on-chain data of Bitcoin itself, comparing it with other L1s, and deeply studying the Bitcoin ecosystem, we mainly have 2 discoveries:
1. Active addresses alone cannot fully explain that BTC’s on-chain indicators have improved this month. The number of whale addresses and the number of addresses excluding zero assets decreased in September.
2. The activity of addresses on the chain does not necessarily reflect the activity of BTC investors. After in-depth ecological analysis, it can be said that on-chain activities more indicate investors' confidence in the BTC ecosystem. Ordinals and Inscriptions constitute the active ecological environment on the BTC chain. main reason. And through the analysis of the amount of a single transaction, we can observe signs that market sentiment is picking up.
On-chain data, as verifiable data that reflects blockchain transaction activities in real time, reflects more of the activity direction of a few people in the industry or more "frontier and core". For the public chain, all development of its core technology or application innovation occurs on the chain, just like Bitcoin's Ordinals and Inscriptions. Its advanced nature can be said to be a kind of weathervane. Rather than saying that the data on the chain constitutes the fundamentals of this chain, it is better to say that this fundamentals is different from the ordinary stock market, and more emphasis is placed on "advancedness". After all, the technological nature of blockchain technology has also brought benefits to participants. a certain threshold.
As the proportion of mature investors in the industry increases, the analysis of on-chain data has increasingly become an important reference for investment decisions. It is like a market microscope that can penetrate deep into the ecology and reveal the inner world on the chain through various indicators. It is worth emphasizing that this data cannot be faked.
write at the end
Judging from the data on the chain, the story of BTC is gradually escaping from the setting of "expensive payment instruments". Ecological innovations including Ordinals, Inscriptions, BRC20, etc. will become the main force in the continuation, providing more opportunities for the BTC ecosystem. possibility. In addition to the on-chain data analyzed in this article, the BTC halving (block reward halving) is also one of the important factors affecting the BTC market. Halvings effectively reduce the available supply by reducing the rate at which new Bitcoins enter the market. According to OKLink data, on October 8, we ushered in the 200-day countdown to the BTC halving. We will wait and see for BTC to have a more open and innovative future!