Bitcoin volume falls to an 18-month low: Runes craze subsides, ecosystem seeks new narrative

According to the latest report from The Block, Bitcoin network transaction activity has fallen to its lowest level in 18 months, with the 7-day moving average transaction volume reaching 316,000 last week, a drop of over 50% from the peak of 700,000 daily transactions in mid-2024.

Although the recent volume has slightly rebounded to about 350,000 transactions, this figure is still well below market expectations, reflecting that the activity level of the Bitcoin on-chain ecosystem is experiencing a significant cooling.

Runes and Ordinals: From Hype to Silence

Behind the sharp decline in volume, the fading enthusiasm for Bitcoin's native protocols Runes and Ordinals has become a key factor. In the spring of 2024, these two major protocols ignited market enthusiasm, attempting to inject decentralized applications (DeFi) and non-fungible token (NFT) functionalities similar to Ethereum into the Bitcoin blockchain's unique mechanism.

The Ordinals protocol supports data embedding in the form of inscriptions by assigning a unique serial number to the smallest unit of Bitcoin, "Satoshi" (聪), sparking the NFT craze; on the other hand, the Runes protocol, based on the UTXO model, aims to optimize the issuance of fungible tokens and attempts to replace the BRC-20 standard, becoming the "new favorite" for issuing Bitcoin native assets.

When the Runes protocol was launched in April 2024, its transaction share once reached as high as 68% of the Bitcoin network, and on-chain transaction fees soared to a thousand sats/vB, resulting in a significant increase in miner income. However, the good times did not last long, as Runes' complex distribution mechanism and insufficient user experience led to a rapid decline in its popularity, with the current daily usage dropping to only 10,000 times, a nearly 99% plummet from its peak.

The trading activity of Ordinals has also significantly shrunk. On-chain data shows that the trading volume of BRC-20 and tokens related to Runes has only shown weak signs of stabilization after months of decline, far from regaining its former glory.

Why has the frenzy subsided?

The silence of the Bitcoin native protocol is hindered both by technical constraints and a shift in market sentiment.

The design of Runes and Ordinals has not fully addressed the efficiency issues of the Bitcoin network. While Runes optimizes the UTXO expansion problem of BRC-20, its complex symbol allocation mechanism and lack of anti-squatting design have led to early high-quality symbols being quickly occupied, resulting in high participation costs for retail investors and drained market enthusiasm. Ordinals, on the other hand, have caused network congestion due to inscription transactions, leading to high Gas fees and poor user experience, limiting their widespread adoption.

Secondly, the decentralized protocols of the Bitcoin ecosystem further weaken its competitiveness. Standards such as Runes, BRC-20, Ordinals, and even the emerging BRC-2.0 are competing independently, leading to fragmented liquidity and user attention, making it difficult to form a unified network effect.

In contrast, blockchain ecosystems such as Ethereum and Solana, with their mature smart contracts and developer communities, provide more efficient DeFi and NFT solutions, attracting a large amount of speculative capital and user outflow.

In addition, the sluggish market sentiment has exacerbated the ecological dilemma. The inscription craze in the spring of 2024 once led to the explosive rise of tokens such as ORDI and SATS, but the subsequent valuation adjustment of over 90% has shifted investors from frenzy to caution. On social media, discussions about Runes and Ordinals have shifted from bullish to indifferent, and community cohesion has significantly declined.

Structural challenges of the Bitcoin network

The sluggish trading activity in the Bitcoin network reflects the structural challenges faced by its ecological expansion beyond being "digital gold." The decentralization and security design of Bitcoin make it unmatched in value storage, but its block size limitations and transaction throughput bottlenecks make it difficult to support high-frequency DeFi or NFT activities.

The Ordinals craze in 2024 briefly drove up transaction fees, accounting for more than 20% of miner revenue, but this is more of a speculative short-term phenomenon rather than sustainable ecological growth.

At the same time, the internal disputes within the Bitcoin community regarding the native protocol have not subsided. Some core developers believe that the surge of inscriptions and protocols like Runes resembles a "spam" attack, occupying valuable block space and threatening network security.

At the end of 2023, Bitcoin Core developer Luke Dashjr submitted a patch to fix vulnerabilities, attempting to limit inscription transactions, which sparked intense debate within the community. Although strict restrictions were not subsequently implemented, this incident highlights the challenging balance between innovation and security in Bitcoin.

Future Outlook: Where is the Dawn?

Despite the current slump in on-chain Bitcoin activity, the market is not without hope. CryptoQuant analysts point out that the significant increase in long-term accumulation addresses historically often heralds a rise in Bitcoin prices, reflecting investors' continued confidence in it as a store of value. In addition, the upcoming launch of the BRC-2.0 protocol promises to introduce smart contract functionality, which could inject new vitality into the Bitcoin ecosystem. However, its actual effect still needs time to verify, as the past "flash in the pan" of previous protocols has kept the market cautious.

For Runes and Ordinals, the future recovery depends on the following conditions:

First is the technical optimization, enhancing user experience and trading efficiency;

Second, community integration reduces protocol fragmentation and creates a stronger network effect.

Thirdly, external catalysts such as favorable policies or the return of market hotspots. Recently, the strategic Bitcoin reserve executive order signed by U.S. President Trump and BlackRock's suggestion for investors to allocate 2% of their assets to Bitcoin have both boosted market sentiment. However, these favorable factors primarily affect the price level, and it remains uncertain whether they can directly stimulate the on-chain ecosystem.

Written at the end

Bitcoin network volume falls to an 18-month low, the craze for Runes and Ordinals recedes, revealing the difficult exploration of its ecological expansion. Bitcoin's status as "digital gold" is unshakable, but to carve out a share in the DeFi and NFT sectors, it still needs to overcome many technical and community barriers.

The current market low may be an inevitable path for the survival of the fittest in the ecosystem. Only through grounded technological breakthroughs and the reshaping of community consensus can the Bitcoin on-chain ecosystem truly revive. Investors and developers must remain patient and await the next "supernova" explosion.