Bitcoin's Network Activity Declines Amidst ETF Outflows
By: Isha Das
Bitcoin's network activity has been dwindling over the last six months, according to recent data, marking a significant decline in active address participation. While the transaction volume on the Bitcoin network has remained stable, it is the shrinking number of unique active addresses that signal a concerning trend. This divergence reflects the growing adoption of exchange-traded funds (ETFs) and derivatives for Bitcoin transactions, complicating traditional price discovery methods. As the bear market prolongs, Bitcoin's on-chain footprint shows signs of narrowing, despite the market exposure appearing active elsewhere, echoing patterns from past market corrections.
Glassnode data illustrates that Bitcoin's active addresses were approximately 778,680 on an eight-day average in mid-August 2025, which plummeted to about 535,942 by February 2026, indicating a rough 31% decline. This notable decrease coincides with extended periods of weakened on-chain participation flagged by analysts like CryptoQuant. The last comparable scenario was in 2024, where such patterns preceded a notable market correction. Additionally, even as the transaction counts suggest up to 439,000 transactions daily, the breadth of on-chain participation is not aligned, suggesting that fewer entities are conducting these transactions, likely comprising exchanges, custodians, and large players consolidating activity to fewer addresses.
The macroeconomic conditions have also influenced these trends. Bitcoin has been behaving as a high-beta asset sensitive to macroeconomic factors like inflation. Recent reports indicate that US inflation is cooling, but rates and broader market tactics remain unstable. This has led to an environment where retail and institutional investors often reduce activity on the Bitcoin chain, preferring ETF products and brokerage accounts for their trading activities. Such practices have resulted in multi-week net ETF outflows totaling an estimated $4.5 billion year-to-date, significantly moving activity away from self-custody wallets.
Furthermore, stablecoins continue to play an increasing role in day-to-day crypto transactions, absorbing more demand and further narrowing the function of Bitcoin's network. As Bitcoin now faces a six-month slump in active network breadth, it sets up multiple scenarios for the future. The potential paths include continued market apathy, a possible liquidity thawing accompanied by a rebound in active address growth, or an evolutionary displacement where Bitcoin's role as a digital macro asset with reduced on-chain retail activity becomes pronounced.
