High fees, Runes excitement lead to drop in Bitcoin active addresses

It was mentioned a few weeks ago that for the first time since March 2020, the 7-day moving average of active addresses on the Bitcoin BTC -1.91% network fell below 700,000 as fees surged after the halving due to excitement about Runes. 

This was not unexpected; high fees can price out users and prevent them from interacting with the blockchain.

When fees become unsustainably high, like they did with Runes, users who are unwilling to pay them sit back. Eventually, the hype dies down, and fees stabilize again, allowing the users to come back and transact at more leveled prices.

However, that does not seem to be the case more recently. While the 7-day moving average dropped to 689,810 on April 23, it rebounded slightly to 839,400 on April 30 as fees calmed down. The 7-day moving average of the average transaction fee on the network was $39.15 on April 23 compared to $11.92 on April 30.

The moving average of active addresses has fallen lower than before, at only 655,190 on May 12. In contrast, the moving average of transaction fees has also declined to $3.86, in line with where fees were pre-halving.

A similar trend has emerged for new addresses on the network, which typically follow a similar pattern to active addresses, given transactions generate change addresses. They then send any remaining funds not sent in a transaction to a different address that's still controlled by the sender, sort of like getting change back when you pay in cash. The moving average of new addresses dipped to 290,000, which is the lowest it has gotten since July 2018.

Runes-related transactions still make up a sizable portion of Bitcoin activity, typically accounting for more than half of daily transactions since they launched. The frenetic energy and the need to be the first to get in have died out, however, allowing for fees to calm down since there’s less of a desire to pay a heavy premium to get a transaction prioritized.

The high fees might have initially caused the slowdown in bitcoin active addresses, but it does not seem to be the main culprit anymore. Some people may continue waiting for further indications that the Runes excitement is truly over. The broader market slowdown could also be playing a role in the decline.

This is an excerpt from  The Block's Data Insights newsletter . Dig into the numbers making up the industry’s most thought-provoking trends.