Small Signs of Optimism from Bitcoin Fees and Transactions
![Small Signs of Optimism from Bitcoin Fees and Transactions](/content/images/size/w1200/2023/05/2021-07-12-bitcoin-network-demand-model-banner-32.jpg)
Disclaimer: Your capital is at risk. This is not investment advice.
Bitcoin Network Demand Model
The short-term transaction signal turns on again this week, a result of a massive block that went through last weekend when the price surged from US$38k to US$45. The spike in volume turned out to be a bull trap. The signal is unlikely to stay on for long without a more sustainable recovery in on-chain activity.
![](https://www.bytetree.com/content/images/2023/05/2022-03-07-ndm-116-jukebox.png)
Last weekend saw a massive block confirmed on the Bitcoin Network, measuring about US$8.3bn. Our understanding is that the series of transactions in the block were technical in nature (the reorganisation of addresses) rather than a massive buyer and therefore has zero significance as far as network expansion is concerned. This can be seen on the x-axis below as the incongruously large bar.
![](https://www.bytetree.com/content/images/2023/05/2022-03-07-ndm-116-1.png)
The upshot was to lure the market into a false sense of excitement. Still, there was no follow-through in terms of activity, and as the news from Ukraine continues to deteriorate, bitcoin succumbed to the broader sell-off in risk assets.
However, the short-term transaction series did turn on, although it would be more comforting if the 5-week spend line (yellow, chart below) was moving positively rather than negatively.
![](https://www.bytetree.com/content/images/2023/05/2022-03-07-ndm-116-2.png)
As predicted last week, we were due a big lump of miner selling and that duly came through, which can be seen in the first exhibit as a large anomaly, this time on the top bar chart (measuring around US$74m). Miner’s Rolling Inventory (MRI) briefly picked up as a result, but again this was short-lived, and the series remains below the level deemed bullish.
![](https://www.bytetree.com/content/images/2023/05/2022-03-07-ndm-116-3.png)
In better news, both transactions and fees have sharply bounced, as shown in the bottom two charts. This might be an early indicator that bitcoin’s usage as a monetary network has started to accelerate, perhaps as a result of the Ukraine conflict. If this continues and its use case as a genuine store of value is proven over this very traumatic period, it would be hugely positive for the long-term outlook.
![](https://www.bytetree.com/content/images/2023/05/2022-03-07-ndm-116-4.png)
![](https://www.bytetree.com/content/images/2023/05/2022-03-07-ndm-116-5.png)