Bitcoin’s on-chain activity is declining, with transaction counts, UTXO counts and fees all falling significantly over the past three months. At first glance, this may seem like a negative signal, suggesting a decline in demand or a decline in network use. However, looking deeper into the data reveals a different story.
The number of UTXOS steadily increased for most of 2024, peaking around December, followed in early 2025.
This decline has been volatile throughout the past year following a decline in total transaction counts, but has been on a downward trend since December 2024.
I’ll talk about the same thing about Bitcoin trading fees. After a period of high congestion and surge in rates during half of half of April 2024 and subsequent market gatherings, costs have fallen to historically low levels, approaching a SAT/VBYTE of 1-2.
This environment creates the ideal window for UTXO integration. In this window, large holders and exchanges can merge outputs to optimize future efficiency. The decline in UTXOS is not a sign of sales, but a technical move to minimize transaction costs before the network experiences another high rate period.
The lower transaction count also matches this shift. A decrease in the number of on-chain transactions suggests fewer unique transactions, but this does not necessarily mean that demand for Bitcoin has declined. Instead, it shows that fewer entities frequently move coins.
The increase in institutional custody solutions may reduce the need for chain transfers. Unlike retailers who regularly move BTC between exchanges and wallets, institutions usually keep Bitcoin refrigerated and kept for long periods of time, making activities easier to see on-chain.
An important factor that dispels the notion of bearishness is the resilience of Bitcoin prices. Despite a sharp decline in UTXOS and trading, Bitcoin remained stable at over $90,000, with no signs of market fatigue.
The missing link in the story of decaying in the chains is the role of the Spot Bitcoin ETF. Since their launch, these ETFs have absorbed a large portion of their BTC supply, and the inflow has skyrocketed until the end of 2024.
January and February 2025 have seen slightly lower inflows than the record highs at the end of last year, but ETFs still have a steady accumulation of Bitcoin and are strong for price stability. We offer a wide range of floors. When an institution purchases Bitcoin via ETF, the BTC they acquire is usually moved to custody, significantly reducing the need for transactions on the chain. This helps explain why trading numbers are falling even when institutional demand for Bitcoin remains high.
On-chain trends reflect market changes rather than market weakening. Retailers who have contributed to historically high on-chain activities appear less active as ETFs take over as the main tool for Bitcoin investment. In exchange for large holders, we have used the recent low-wage environment to optimize the UTXO structure and reduce the number of small outputs.
As a result, on-chain data appears quiet, but this quietness is not an indicator of bearish emotion. It is a sign that Bitcoin usage patterns are evolving. The decline in trading, UTXOS and fees highlight the increased maturity of the market, where long-term holders and institutions play a major role in shaping the Bitcoin financial situation. Networks are becoming more efficient, supply remains constrained, and demand remains robust due to ETF inflows.
The reason why Bitcoin UTXOS, trading and fee declines first appeared was not shown in Cryptoslate.
