The latest on-chain data shows that the Bitcoin network activity has been waning over the past few months, with the blockchain metric reaching a new low recently.

Why Is The Bitcoin Network Activity Falling?

In a new post on the X platform, CryptoQuant head of research Julio Moreno discussed how Bitcoin is witnessing an unusual period of low transaction activity, with the mempool almost empty and transaction fees falling to 1 sat/vB. This represents the lowest level of network activity since March 2024, indicating a notable decline in on-chain demand.

For context, the mempool refers to a temporary storage area where pending Bitcoin transactions await processing. The mempool usually remains congested during periods of elevated on-chain demand and network activity. However, new on-chain data shows that most transactions have been confirmed, leaving the mempool nearly empty.

Source: JJCMoreno/X

A nearly empty mempool is a rare phenomenon often associated with waning on-chain activity or shifting market dynamics. According to Moreno, the major contributor to this decline is the fading excitement around Runes and BRC-20 tokens.

Runes and the BRC-20 token standard are protocols that enabled the creation and minting of fungible and non-fungible tokens on the Bitcoin blockchain. While these protocols were met with significant hype upon launch, the initial excitement didn’t translate to sustained use.

Source: JJCMoreno/X

However, at the peak of the Runes and BRC-20 frenzy, the number of confirmed transactions on the Bitcoin network crossed the 1.5 million milestone in a single day. Specifically, the pioneer blockchain processed over 1.6 million unique transactions between sender and receivers on April 23, 2024, with the launch of Bitcoin Runes playing a pivotal role.

The decline in transaction count has broader implications for various components of the pioneer blockchain, including miner revenues. Miners rely on transaction fees as another source of income, especially as block rewards have been further slashed since the recent halving event. Hence, an extended period of low fees could impact mining profitability, potentially influencing network hash rate distribution.

Implications On BTC Price

An almost-empty mempool and low transaction activity are not exactly the best combinations for positive price action. Specifically, it could suggest low speculative interest and reduced investor enthusiasm, leading to a consolidation of the Bitcoin price.

As of this writing, BTC is valued at around $100,450, with a nearly 2% decline in the past 24 hours. According to CoinGeko data, the premier cryptocurrency has lost roughly 3.5% of its value in the last seven days.

The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView

Featured image created by Dall-E, chart from TradingView

Bitcoin has dropped below the $100,000 threshold as the broader crypto market experiences heightened volatility.

This downturn coincides with a significant decline in transaction activity on the Bitcoin network, bringing memory pool (mempool) volume to its lowest level since March 2024.

Market Downturn Wipes Out Over $500 Million in Liquidations

Over the past 24 hours, Bitcoin fell below $100,000, shedding over 4% of its value and briefly touching $98,000. Data from BeInCrypto indicates that Bitcoin initially peaked at $102,000 before succumbing to selling pressure.

The decline follows broader market instability, with the total crypto market cap losing 5% of its value. Other major cryptocurrencies also faced steep declines. Ethereum, Solana, and BNB each recorded losses exceeding 7%.

The increased volatility triggered a liquidation spree, wiping out over $555 million in leveraged positions, according to CoinGlass. More than 239,000 traders faced forced liquidations, with long traders—those betting on price increases—suffering the heaviest losses, amounting to $491 million.

Short traders, anticipating price declines, lost approximately $63 million.

The turmoil follows US President Donald Trump’s decision to enforce stringent tariffs on major trading partners, including Canada.

The administration claims the move is designed to curb the flow of undocumented immigrants and illicit substances into the US. However, the tariffs have sparked concerns about inflationary pressure on American consumers.

In response, Canadian Prime Minister Justin Trudeau announced retaliatory measures, imposing 25% tariffs on $106 billion worth of American imports.

The first round of levies, targeting $30 billion in goods, will take effect immediately, with an additional $125 billion in tariffs scheduled in the coming weeks.

Bitcoin Network Sees Sharp Drop in Transactions

Beyond market turbulence, Bitcoin’s network activity has declined significantly, with the mempool—the waiting area for unconfirmed transactions—showing a notable reduction in volume.

On February 1, data from CryptoQuant shows that the mempool is nearly empty, indicating a steep drop in transaction volume. The data further reflects that Bitcoin transaction fees have dropped to 1 sat/vB, signaling reduced demand for block space.

This marks the lowest level of transaction activity since March 2024.

This trend raises concerns about Bitcoin’s usage as a medium of exchange, with some analysts suggesting that the growing perception of BTC as digital gold may discourage transactional use.

Bart Mol, host of the Satoshi Radio Podcast, criticized the shift in narrative, stating that celebrating an empty mempool overlooks the potential risks to Bitcoin’s foundational role. He likened it to “wood rot” in a house’s foundation, warning that a lack of transaction activity could undermine Bitcoin’s core functionality.

“Bitcoiners celebrating that the mempool cleared is one of the most retarded things I’ve seen in a while. The digital gold narrative is slowly destroying the foundation of Bitcoin, like wood rot in the foundation of a house,” Mol wrote.

Indeed, Mol’s comment aligns with Bitcoin’s increasing adoption as a reserve asset. Several corporations and governments have begun considering Bitcoin for their treasuries. These narratives reinforce the token’s position as a long-term store of value rather than a transactional currency.

However, the ongoing decline in on-chain activity raises questions about Bitcoin’s long-term utility beyond being a digital gold reserve.

El Salvador, one of the most pro-crypto countries in the world, added 5 BTC to its Bitcoin Reserve on Saturday. The country purchased over $5 million worth of BTC in the past month.

This move comes as El Salvador is modifying its Bitcoin policies to align with conditions set by the International Monetary Fund (IMF).

El Salvador’s Bitcoin Accumulation Continues Amid IMF-Fueled Policy Adjustments

On February 1, El Salvador’s Bitcoin Office confirmed the purchase, pushing the country’s total reserves to approximately 6,055 BTC, valued at over $606 million.

Over the past month alone, the government has acquired around 50.42 BTC, maintaining its steady accumulation since embracing Bitcoin as legal tender in 2021.

However, the country has also recently been making adjustments to its Bitcoin regulatory framework. In December 2024, the government reached an agreement with the IMF for a $1.4 billion loan under the Extended Fund Facility (EFF).

To meet the terms of this deal, the government has adjusted key Bitcoin policies. These include making Bitcoin acceptance optional for businesses, eliminating tax payments in BTC, and gradually phasing out the state-backed Chivo wallet.

This move was unsurprising, considering the IMF has consistently voiced concerns about El Salvador’s Bitcoin adoption, citing risks to financial stability. While these regulatory updates suggest some concessions, the government’s broader Bitcoin strategy remains intact.

Last December, Stacy Herbert, director of the National Bitcoin Office, hinted at an accelerated Bitcoin accumulation plan. She also highlighted initiatives to enhance Bitcoin education and public sector training.

The government official reiterated her stance earlier this year, saying:

“El Salvador will continue buying bitcoin (at possibly an accelerated pace AND at a discounted price) for its Strategic Bitcoin Reserve.”

Unsurprisingly, El Salvador’s pro-Bitcoin stance has attracted major crypto companies to its shores. Stablecoin issuer Tether recently relocated its headquarters to the country, crediting its favorable regulatory climate under President Nayib Bukele.

Shortly after, Bukele encouraged Rumble CEO Chris Pavlovski to consider moving his company to El Salvador as well.