Bitcoin Network Cools, But Adoption Heats Up: What's Next?
Bitcoin Network Cools, But Adoption Heats Up: What’s Next?
This report examines and analyzes the Bitcoin ecosystem and the BTC price in June 2024. How may these developments impact the future of the leading cryptocurrency?
Key takeaways: Bitcoin started June at $67,741 but closed at $61,529, marking a 15.2% decline.
The Crypto Fear and Greed Index dipped to its lowest level in 18 months, reflecting declining investor confidence.
The German government’s sale of more than 27,000 BTC and the long-awaited repayments from the collapsed Mt. Gox exchange raised concerns about increased selling pressure.
Despite a brief uptick in daily active addresses, Bitcoin’s network activity slumped in June.
Bitcoin’s dominance reached 52.92% on June 15, the highest since April 2021.
Immunefi reports a staggering $572.7 million lost to hacks and scams in Q2 2024, highlighting major breaches on DMM Bitcoin and BtcTurk.
Despite the price slump in June and security issues, the Bitcoin ecosystem saw positive signs of adoption. This is evidenced by Strike’s expansion into the UK market and Bolivia’s legalization of Bitcoin, spot Bitcoin ETFs attracting inflows and investment activity in Bitcoin mining companies.
Since its April 2024 launch, Runes has significantly impacted the Bitcoin network, generating 2,536 BTC in fees and outperforming other Bitcoin-based protocols like Ordinals and BRC-20 in transaction share.
Bitcoin-based NFTs reached $116.3 million in sales, though this was down nearly 40% from May.
What You’ll Find in This June Bitcoin Analysis:
What Is Bitcoin?
Bitcoin (BTC) is a decentralized cryptocurrency created to function as a digital currency and means of payment that operates independently of any single individual, organization, or authority. It eliminates the need for third-party intermediaries in financial transactions. Bitcoin is allocated to blockchain miners to validate transactions and can be purchased through various exchanges.
Unveiled to the public in 2009 by an enigmatic developer or group known as Satoshi Nakamoto, Bitcoin has become the most widely recognized cryptocurrency in the world. Its success has spurred the creation of numerous other cryptocurrencies.
BTC Starts June Strong, Ends 15% Down Amid Fear
The month began with Bitcoin trading at $67,741 on June 1. By June 7, the price had risen to $70,890, an increase of 4.65%. However, the optimism was short-lived as Bitcoin’s price began to steadily decline throughout the month, dropping to $58,944 on June 24, marking a 20.2% decline. During the last week of June, the price rebounded slightly to close the month at $61,529, down 15.2% for the month.
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The Crypto Fear and Greed Index, a key gauge of market sentiment, fell to its lowest level in 18 months. On June 24, the index entered the “Fear” zone and has remained there ever since. This significant drop is one of the largest since January 11, 2023, when Bitcoin traded at $17,200 just two months after the collapse of the FTX crypto exchange, and reflects a dramatic shift in investor confidence.
German Government’s Bitcoin Sale and Mt.Gox Repayment Raise Market Concerns
Concerns are growing that the German government’s Bitcoin activities may be contributing to recent market instability. Since June 19, the government has been transferring Bitcoin to centralized exchanges like Bitstamp, Coinbase, and Kraken with the presumed intent to sell. As of July 9, Germany has transferred and/or sold approximately 27,017 BTC from its original holdings of 49,860 BTC, which it owned approximately 20 days ago (June 19). The German government now owns 22,846k Bitcoins, valued at over $1.32 billion.
However, Bitcoin traders should not act on impulse when it comes to government BTC sell-offs, according to Ki Young Ju, founder and CEO of on-chain analytics platform CryptoQuant. In a July 5 post on X, the expert downplayed the significance of the recent government sales: “It’s only 4% of the total cumulative realized value since 2023. Don’t let gov’t selling FUD ruin your trades”.
Govt #Bitcoin selling is overestimated. $224B has flowed into this market since 2023. Government-seized BTC contributes about $9B to the realized cap. It's only 4% of the total cumulative realized value since 2023. Don't let govt selling FUD ruin your trades. pic.twitter.com/12fy2sKsXH — Ki Young Ju (@ki_young_ju) July 5, 2024
On June 26, the U.S. government also transferred 3,940 BTC (worth roughly $240 million) to Coinbase Prime Deposit. This appears to be the first confirmed government Bitcoin sale since March 2023, when they sold 9,861 BTC, then worth $216 million.
Additionally, the long-anticipated repayments from the collapsed crypto exchange Mt. Gox Trustee began in June. The total Bitcoin balance on all known addresses of the Mt. Gox Trustee is 94,457 BTC, with 47,288 BTC being moved from these addresses as of July 5. This influx of liquidity also raised fears of additional selling pressure, contributing to the month’s bearish trend.
Total current balance on all known addresses of the MtGox Trustee: 94457.46716047 BTC. 47228.73365683 BTC have been moved away from these addresses since funds were consolidated on 2024/05/30. $BTC #bitcoin #mtgox mt.gox mt gox 2024-07-05T07:02:09.483Z — MtGoxBalanceBot (@MtGoxBalanceBot) July 5, 2024
Bitcoin’s Price Future: A Mix of Fear and Optimism
The future of Bitcoin’s price is a hot topic, with analysts offering a range of predictions. Some, like 10x Research, warn of an impending decline. In their July 4 note, analysts predict that Bitcoin will fall below $50,000 in the near future. This potential drop is attributed to dwindling investor interest and an increase in selling activity.
However, not all analysts share this pessimistic outlook. Bernstein analysts believe that the current bull market cycle could extend, with a price target for Bitcoin approaching $200,000 by the end of 2025. This significant upward revision is fueled by the recent approval and growing popularity of spot Bitcoin exchange-traded funds (ETFs), which allow investors to gain exposure to Bitcoin without owning the cryptocurrency directly.
On-Chain Data Reflects a Complex June for Bitcoin
Bitcoin’s network activity declined in June, signaling a stark contrast to the typically high transaction volumes observed in previous months.
The number of active Bitcoin wallets dropped to a multi-year low in June. This metric has been steadily declining since September 2023, when there were 31.33 million active addresses on the network. A declining number of active addresses indicates a lack of buying and selling activity among Bitcoin holders, suggesting a period of market consolidation.
While there was an uptick in daily active addresses in June (reaching 451.3k on June 30, up from 312.1k on June 1), the overall picture remains bearish. The number of monthly active addresses paints a different picture, falling to 20.04 million in June, continuing a downward trend that began in September 2023.
Additionally, the number of new addresses created on the Bitcoin network in June decreased by 8.2% to 7,97 million.
The Bitcoin network also saw a slight 4.2% decrease in daily transactions in June – from 18.19 million in May to 17.42 million in June.
While Bitcoin’s total value locked (TVL) reached $1.1 billion on June 7, it went on a steady decline throughout the month. By June 30, TVL had fallen to $972.3 million, marking an 11.6% decrease in just 23 days.
Additionally, the Bitcoin network experienced a significant drop in block size – the measure of transaction data included in each block, which hit a yearly low on June 7, reaching 1,329 MB.
The reduction in block size could be linked to the decreased transaction volume and lower overall network activity, highlighting a period of consolidation within the Bitcoin blockchain.
Bitcoin block size hits yearly low on June 7, 2024. Source: Blockchain.com
Bitcoin exchange reserves hit a three-year low on June 13 (2,821,534 BTC), reflecting a significant withdrawal of Bitcoin from exchanges.
This trend often suggests a longer-term holding strategy by investors, as coins moved off exchanges are less likely to be sold in the short term. It can also indicate a lack of selling pressure, which might bode well for future price stability.
Despite overall market volatility, Bitcoin’s dominance spiked on June 15, reaching 52.92%, a new high since April 2021.
Analysts attribute this rise to potential factors like excitement surrounding spot Bitcoin ETF approvals, which may be attracting institutional investors seeking stability compared to more volatile assets. The increased dominance could signal growing investor confidence in Bitcoin or a shift towards safer havens during market uncertainty. However, this trend might be temporary.
June saw contrasting trends in Bitcoin transaction fees. Early in the month, fees temporarily spiked to $83.61 on June 7, caused by increased activity on the network. By the end of the month, however, transaction fees had fallen to their lowest level since October 2023, hitting $1.38 per transaction on June 29 and $1.05 on July 7. This decline is a sign of lower activity on the Bitcoin network, which leads to less competition.
Amidst these fluctuations, the total transaction value on the Bitcoin network reached a yearly high of $25 billion. This spike indicates that while the number of transactions may have been low, the value of the transactions conducted was significantly higher. Such activity often points to institutional involvement or large-scale transactions, reflecting confidence among major players in the market.
Spot Bitcoin ETFs Attract Inflows
Despite the market downturn that saw Bitcoin plummet over 15% in June, spot Bitcoin ETFs saw significant inflows in the first half of the month. These inflows reached a staggering $886.6 million on June 6, indicating strong investor appetite for this new financial instrument.
However, after seeing net inflows in May and early June, these products experienced net outflows of $581 million, after seeing net inflows in May and early June.
Despite the outflows, the overall picture for spot Bitcoin ETFs remains positive. These financial products still managed to attract net inflows by the end of the month, even during the broader market decline, suggesting a level of resilience.
BlackRock’s and Fidelity’s spot Bitcoin ETFs, namely IBIT and FBTC, accounted for a significant portion of total issuer ETF inflows over the past three months (as of July 1, 48,8% and 17,54%, respectively). The Grayscale Bitcoin Trust (GBTC) came in third (12,65%).
June also saw continued expansion in the spot Bitcoin ETF landscape. The Australian Securities Exchange (ASX), the country’s largest exchange, approved its first-ever spot Bitcoin ETF on June 15. The VanEck Bitcoin ETF (VBTC), issued by investment firm VanEck, began trading on June 20. Additionally, asset manager Hashdex proposed to launch a combined spot Bitcoin and Ether ETF on the Nasdaq exchange in a June 18 filing with the SEC. This continued expansion indicates growing confidence in the potential of spot Bitcoin ETFs as a viable investment instrument.
Update: A dual Ethereum and #Bitcoin ETF filing from @hashdex just dropped. Will be market cap weighted. Shouldn't be a surprise to anyone — makes a lot of sense. Final deadline for SEC approval should be sometime around the first week of March 2025 pic.twitter.com/5wB7ucvbgM — James Seyffart (@JSeyff) June 18, 2024
Signs of Miner Capitulation and New Market Conditions
According to a CryptoQuant report from July 3, the Bitcoin network is showing some signs of miner capitulation. During capitulation, miners may be forced to shut down operations or sell off their Bitcoin reserves. Historically, this event has coincided with Bitcoin price bottoms.
“The network hashrate has continued to decline after the halving and has experienced a drawdown of 7.7%, the largest since December 2022, shortly after the FTX exchange collapse that coincided with the Bitcoin cycle bottom”, the report said.
Miners are extremely underpaid due to lower Bitcoin prices, reduced block rewards after the halving and the collapse of transaction fees.
#Bitcoin Miner capitulation mirrors Dec 2022 levels with a 7.7% hashrate drop, similar to post-FTX collapse conditions. Such declines often signal potential market bottoms. pic.twitter.com/OZ3PnDdKKf — CryptoQuant.com (@cryptoquant_com) July 5, 2024
Hashprice, a metric that quantifies how much a miner can expect to earn from a specific quantity of hashrate, continued to decline in June. Despite a price spike of $92 per petahash/second (PH/s) on June 8, this metric began to decline, reaching its lowest point for the month on June 24 ($47 per PH/s).
This trend is continuing in July. On July 5, this metric fell to $44.5 per PH/s, its lowest level since December 2022. This significant drop coincides with the aftermath of the FTX exchange collapse, which rocked the cryptocurrency market in late 2022.
Corporate Moves and Expansion
Despite the challenging market conditions, several mining companies continued to expand and invest in new technologies. CleanSpark, for instance, purchased five mining facilities in Georgia, with the combined operating hashrate anticipated to exceed 3.7 EH/s. Additionally, CleanSpark acquired GRIID Infrastructure, another Bitcoin mining firm, in a $155 million deal.
Similarly, IREN (formerly known as Iris Energy), a Nasdaq-listed Bitcoin mining firm, raised $413 million to fund its Bitcoin mining expansion, indicating a strong commitment to expanding its mining capabilities despite the broader market challenges. The company aims to reach 30 EH/s of hash rate capacity and 510 MW of data center capacity this year.
The telecommunication firm T-Mobile Deutsche Telekom also announced on June 15 its plans to enter the Bitcoin mining space. The company already operates nodes for several networks, including Bitcoin, Bitcoin Lightning, and Ethereum.
Faced with declining profitability after the latest Bitcoin halving, some mining companies are exploring new revenue streams. Artificial Intelligence (AI) is emerging as a potential solution. Core Scientific, a major bitcoin mining player, announced on June 3 a $3.5 billion deal with CoreWeave, an AI cloud provider. As part of the deal, Core Scientific will provide an additional 200 megawatts of infrastructure to host CoreWeave’s high-performance computing (HPC) operations.
The tech-focused firms are also investing in Bitcoin mining companies. On June 24, Bitcoin miner Hut 8 Corp announced a $150 million investment from investment manager Coatue Management, owned by billionaire Philippe Laffont.
Tech-focused firms also invest in Bitcoin mining companies. On June 24, Bitcoin miner Hut 8 announced a $150-million investment from investment manager Coatue Management, owned by billionaire Philippe Laffont. With this investment, Hut 8 plans to expand its ability to develop and operate complex energy infrastructure to address unmet needs and emerge as a leader in the AI infrastructure market.
Bitcoin Ecosystem Updates
Despite a market slump, the Bitcoin ecosystem has seen continued innovation and global adoption.
Institutional Investors Continue to Adopt Bitcoin
Despite a broader market downturn, institutional interest in Bitcoin remained strong. Publicly traded Japanese firm Metaplanet reportedly increased its Bitcoin holdings to over 10 million in June, buying 20.195 BTC worth $1.2 million.
On July 7, Metaplanet announced another Bitcoin purchase of 42,466 bitcoins for 400 million Japanese yen ($2.5 million).
Additionally, DeFi Technologies, a publicly listed exchange-traded product (ETP) provider and venture capital firm, announced on June 10 that it will hold Bitcoin as its primary treasury reserve asset. This decision comes alongside a positive update from their subsidiary, Valour, which repaid $5 million in loans and boasts $607 million in assets under management as of May 31, 2024.
Bitcoin Startup Receives Investments to Build MEV Products
The Bitcoin startup scene continued to show signs of life. Rebar Labs, a Bitcoin analytics startup, raised $2.9 million in seed funding on June 27 for its Bitcoin-based Maximal Extractable Value (MEV) products.
MEV refers to the additional profit that miners or validators on a blockchain network can potentially extract by manipulating the order of transactions within a block they create.
Rebar is aiming to build an alternative system to the current “mempool” (a temporary pool of unconfirmed transactions) that will allow miners to organize transactions more efficiently.
Expansion continued on the adoption front as well. Strike, a popular Bitcoin payment app, announced its launch in the UK on June 25. Strike’s UK launch extends its global reach to 100 countries and territories, including the U.S., Latin America and Africa, following its European rollout in April.
Bolivia’s central bank, Banco Central de Bolivia (BCB), lifted its ban on Bitcoin and other cryptocurrencies on June 26. This decision opens the door for Bolivian financial institutions to offer transactions involving digital assets.
The BCB’s stated aim is to leverage cryptocurrencies to modernize the country’s payment system and potentially revitalize its struggling economy. This aligns with a broader trend in Latin America, where several countries are exploring the potential of cryptocurrencies to improve financial inclusion and efficiency.
Bitcoin Security Needs Revamp
However, the month was not without its challenges. A report by Immunefi highlighted the significant losses worth $572.7 million suffered by users due to hacks, scams, and other security breaches in Q2. DMM Bitcoin and BtcTurk were the top two exploits, accounting for $305 million and $55 million in losses, respectively, accounting for 62.8% of all losses in Q2 2024. This underscores the need for continued efforts to improve security measures within the Bitcoin ecosystem.
Top 10 Crypto Losses in Q2 2024
DMM Bitcoin $305,000,000 BtcTurk $55,000,000 Hedgey $44,600,000 Lykke $23,600,000 Gala Games $21,000,000 SonneFinance $20,000,000 UwU Lend $19,300,000 Rain $14,800,000 Holograph $14,400,000 Velocore $6,800,000
While the month saw a flurry of venture capital activity and advancements in scaling solutions, the popularity of the Ordinals and Runes protocols, which enable data inscription on the Bitcoin blockchain, appeared to wane.
Investment Surge Fuels Innovation
Venture capitalists continued to show strong interest in Bitcoin DeFi. The Bitcoin staking protocol Lombard secured a $16 million seed round led by Polychain Capital. Lombard will use the funding to expand the Bitcoin restaking ecosystem alongside Babylon, a Bitcoin staking protocol.
QED Protocol, another Bitcoin scaling protocol, secured a $6 million seed funding round from Blockchain Capital. The round pushed their valuation into the prestigious “nine-figure” club (at least $100 million).
Scaling Solutions Gain Traction
Efforts to address Bitcoin’s scalability limitations also saw progress in June. StarkWare announced the launch of a $1million research fund and its plans to support the development of zero-knowledge (ZK) proofs specifically tailored for scaling Bitcoin transactions. This initiative aims to use ZK technology – Scalable Transparent Argument of Knowledge (STARK) cryptography – to scale both Bitcoin and Ethereum simultaneously. This could potentially revolutionize the efficiency of both blockchain ecosystems.
StarkWare plans to scale Bitcoin with ZK-STARKs, making Starknet the first L2 to settle simultaneously on Bitcoin and Ethereum. A world where Ethereum and Bitcoin unite to bring financial autonomy to everyone is not far away. https://t.co/oododI4DyV — Starknet 🐺🐱 (@Starknet) June 4, 2024
Launched in April 2024, the Runes protocol has quickly established itself as a major player in the Bitcoin ecosystem. By providing a new way to issue new tokens on top of Bitcoin, Runes has impacted transaction dynamics, fee structures, and overall network activity.
Since its launch on April 20, Runes has outperformed other Bitcoin-based protocols, such as Ordinals and BRC-20 in terms of transaction share.
The increase in network activity on Runes is helping Bitcoin miners maintain their monthly revenue. Since its launch, Runes has generated 2,536 BTC (as of July 10) in total fees since launch, worth over $148 million, which is a significant contribution to miners’ income.
Bitcoin Runes total fees. Source: Dune Analytics
Bitcoin NFTs Show Mixed Results
The NFT market faced a harsh reality in June, with a 25% drop in sales volume across major blockchains.
In terms of NFT sales volume, the Bitcoin blockchain took second place in the June ranking, surpassing Solana and Ronin (data as of July 1).
Bitcoin-based NFTs gained over $116.3 million in sales volume in June, down nearly 40% from June’s sales volume. The data further revealed that the Bitcoin network attracted around 45k buyers and 72k sellers of NFTs during June. The number of NFT transactions on Bitcoin Ordinals reached more than 132.9k.
On June 8, NFT data tracker CryptoSlam showed that NFTs on the Bitcoin blockchain reached a new all-time high of over $12.3 billion in total sales volume.
Bitcoin Puppets, an NFT collection based on Bitcoin Ordinals, held the top spot in June with a trading volume of over $11 million. NodeMonkes came in second place with a trading volume of nearly 10.5 million. Runestone and Quantum Cats took the third and fourth spots in the June rankings. But all these leading collections experienced red numbers and losses between 21 and 45%.
In contrast, Frucks, which secured the fifth position in the ranking, could gain more than 163.3% in trading volume making 3.88 million.
Notable NFT launches in June: NodeMigos (June 8 – June 15): This collection features 10,000 unique, 28×28 pixel characters. Its quirk lies in its artistic approach of squishing together odd-looking blocks to generate a diverse array of characters, each with its own unique personality and aesthetic appeal. This whimsical and imaginative collection reflects the playful nature of the blockchain community.
Sketchy (June 8 – June 15). This series features 3,333 programmatically generated characters, each boasting a distinct doodle aesthetic. Drawing inspiration from the “network spirituality” that permeates the blockchain community, Sketchy offers a playful and whimsical take on the digital realm.
Run Dogs (June 12 – June 19): This collection features 10,000 unique different colorful images of dogs wearing sunglasses and hoodies, catapulting dog lovers and digital art collectors into the world of Bitcoin NFTs.
Beyond Bitcoin’s Price Dip: Innovation and Adoption Signal Long-Term Resilience
June 2024 was a month of contrasting signals for Bitcoin. The price started strong but ended down over 15%, reflecting a broader market downturn and waning investor confidence. Government activity, such as the German government’s Bitcoin sales and the Mt. Gox repayments, added to the uncertainty. Analysts remain divided on the future, with some predicting a further price drop and others holding a bullish outlook due to the recent approval of spot Bitcoin ETFs.
On-chain data suggests a period of consolidation within the Bitcoin network. Despite a temporary rise in daily active addresses, metrics like new address creation, daily transactions and block size all pointed towards decreased activity. This could be attributed to a longer-term holding strategy by investors, as evidenced by the three-year low in Bitcoin exchange reserves.
However, the network still saw some positive developments. The total transaction value reached a yearly high, indicating large-scale transactions or institutional involvement. Additionally, the launch of spot Bitcoin ETFs in various jurisdictions like Australia and the expansion plans of several mining companies suggest continued institutional interest in Bitcoin’s potential.
While challenges remain, particularly regarding security breaches and potential miner capitulation, June also witnessed positive signs of adoption. Strike’s expansion into the UK market and Bolivia’s legalization of Bitcoin showcase the ongoing global adoption of this digital asset.
The Bitcoin DeFi sector continues to attract significant venture capital investments. Scaling solutions are also progressing, potentially addressing the congestion issues that can hinder wider adoption.
As the Bitcoin market navigates various complexities, the focus will likely remain on enhancing security, expanding global adoption, and fostering technological innovations to sustain growth and stability in the long term.