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As it stands, the Bitcoin (BTC) network is way less active now than it was one year ago. This has led to discussions with investors and financial analysts on how accurately BTC is currently overpriced.
Bitcoin Network Activity Drops Amid Market Consolidation
Calculating the Bitcoin Network Activity Index of February 5, 2025, CryptoQuant estimated the figure to be at 3,760. This is the lowest it has reached in 12 months, a drop of 15% compared to its performance in November of 2024. It had to be main because of the lower transaction rates in the Bitcoin network evident during the period.
Bitcoin transactions are much lower and the daily transaction has reduced by fifty three percent to 346 000 in early February 2025 from the highest of 734 000 in September 2024. BTC Overvalued. This nice dip shows that there are now a smaller population of users who are daily interacting with blockchain.
Impact of Runes Protocol Decline
Some of the reasons that make the transactions significantly low include the fact that the Runes Protocol is one of the Bitcoin tokenization standards that was unveiled in April of 2024 and is mainly used less. The Runes protocol was developed to be used directly to issue fungible tokens on the Bitcoin network, therefore, an alternative way of tokenization using other protocols like Ordinals or BRC-20. BTC Overvalued. However, usage of the site has decreased with time in the last months. Yet, the use of the site has reduced over the last few months.
The current OP_RETURN codes used to record data such as token minting and transfer for Runes Protocol stand at 10,000, and in comparison to its high of 802 000. This indicates a significantly reduced number of active users who are tokenizing via Bitcoin and can be seen as part of the reason for congestion decline.
Bitcoin Mempool Traffic Hits Multi-Year Low
However, it is necessary to note that the traffic in mempool, where Bitcoin transactions are stored before being processed by nodes, has also decreased and is currently at the level of March 2022. The mempool is the list of transactions waiting for the inclusion into Bitcoin block that has not yet been placed among other agreed transactions.
According to data, as several transactions that have not been included in a block, the mempool of Bitcoin in December 2024 recorded 287,000. However, the number has reduced by 99% to about 3,000 by February 5th, 2025. Such a massive decline may be attributed to less number of Bitcoin transactions from all over the world, which might result from the market saturation and elimination of ineffective players.
Is Bitcoin Overvalued at Current Prices?
Other analysts have raised eyebrows if the current price of Bitcoin is warranted given the slow activity within the networks. By implementing the fundamentals of the network, CryptoQuant has put forward various amounts in the range between $48,000 and $95,000 as a fair price for Bitcoin. BTC Overvalued. Since Bitcoin is currently trading around $98,000, this seems to suggest that BTC is somewhat overpriced relative to the network activity provoked by it.
However, market sentiment remains divided. While some of these investors are likely to argue that current prices are too high compared to the activity on the blockchain, others can also consider market exuberance factors such as the trading volume in BTC not to be limited by the rate of transactions and the mempool traffic.
Analysts Offer Diverging Views
There are people who are considering their wisdom and expertise coming from CryptoQuant regarding the value of Bitcoin and whether it is worth investing in it. Others group it under others in what they perceive as the usual volatility that characterizes the market around certain cryptocurrencies such as Bitcoin. 1) One analyst said that current BTC actions mean that it is in the distribution stage which means that the whales are likely to dump their holding before the price drops again.
Conversely, some believe the current status of the network activity is in decline and therefore consider it as a good entry point. A CryptoQuant contributor has noted the necessity to buy BTC, which has attracted interest in dollar-cost averaging into the asset due to the current price levels. The DCA strategy will entail buying Bitcoin at equal time intervals to avoid being affected by a short-term price changes.
Institutional and Long-Term Investors Remain Bullish
However, most institutional investors and market analysts are still optimistic on the BTC price and attribution this to the fact that Bitcoin is still in its nascent stages. Moreover, Standard Chartered Bank continues to be bullish on the currency as it has previously set a price target of $200K by the end of 2025. Some of the factors considered in the financial institutions include; growing institutional demand, the introduction of Bitcoin ETFs and further ability from the current year’s Bitcoin halving event meant to decrease the issuance of bitcoins and create a scarcity in the future.
However, the analysis of Bitcoin’s historical data indicates that there is no direct relationship between the network traffic and the cost of the assets. Lower TCV can in the short term indicate less on-chain demand, but other factors such as macroeconomic environment, institutional uptake and technology growth are bigger determinants of Bitcoin price.
Market Response and Current BTC Price Action
The current price of Bitcoin has also slightly oscillated in the recent times in response to the reduced network activity. Currently, February 7, 2025 BTC is at $97,760 that stayed flat for only 0.2% decline in the last 24 hours.
The market associated with cryptos has not been spared either and there have been fluctuations observed in the prices of these assets. BTC Overvalued. On the other side, many altcoins have followed Bitcoin’s lead regarding the movement, while traders are still skeptical about the activities on-chain since it is still unclear at the moment.
What’s Next for Bitcoin?
Thus, the decreased activity in the Bitcoin network should not be regarded as a sign of a bear market in the long term. As for the further development of BTC, there might be a few factors:
- The institutional flows: major financial companies expand their interaction with Bitcoin, and several asset managers have applied to the stock exchange for the creation of Bitcoin ETFs in various countries.
- Macroeconomic Environment: Inflation rates and measures applied by central banks across the world could affect the demand for Bitcoin as an alternative investment asset.
- Pros of Bitcoin mining: Another advantage of Bitcoin mining is that, in June 2028, the mining reward will again be halved, therefore restricting the amounts of supply in the market and causing an upward trend in prices in the long run.
- Regulatory Risks Policies: As the government formulates and implements various policies and regulations regarding Bitcoins, they may either enhance the adoption and utilization of Bitcoins or hamper it completely.
Long-Term Optimism Remains Strong for BTC
The current low activity on this network warrants discussion about the BTC’s current pricing and usage. However, while some traders think that BTC is overvalued, taking into consideration data on such indicators as TX/vD, others regard it as an ordinary phase in the total market cycle.
The future of Bitcoin appears bright going forward and other institutional investors, and financial experts continue to make favorable forecasts. As for the further growth of the BTC price or its correction in the short term, several factors will play a decisive role, such as the mood of buyers, institutes, and macroeconomics.
