Ordinal NFTs Push Bitcoin Network Activity to Near 2-Year High – What Does This Mean for BTC Price?
The 14-day exponential moving average (EMA) of the number of transactions taking place on the Bitcoin network hit its highest level since April 2021 earlier this month, according to data from crypto analytics firm Glassnode. The 14-day EMA of transactions recently passed 300,000, with analysts and cryptocurrency market commentators citing the recently deployed Bitcoin NFT protocol called Ordinals.
According to crypto derivatives firm BitMEX, as of the 7thth by February, over 13,000 Ordinal NFTs had been minted directly on the Bitcoin blockchain, taking up 526 MB of block space and associated with a spend of 6.77 BTC (worth around $150,000 at current prices).
The deployment of Ordinal NFTs directly on the Bitcoin blockchain has been controversial, with some arguing that it goes against pseudonymous Bitcoin creator Satoshi Nakamoto’s original vision of the Bitcoin blockchain being used only for economic purposes. Whether you agree with the existence of Bitcoin-based NFTs or not, they are making a mark on the network.
So could Ordinals result in a broader increase in network activity that benefits the Bitcoin price?
Bitcoin network fees are not affected yet
Some analysts and commentators have expressed concern that the existence of the Ordinal NFTs, which have resulted in many Bitcoin blocks reaching the 4MB limit, could put upward pressure on network fees. According to Glassnode data, however, there has been no noticeable increase in network fees for now.
Some have argued that if the Ordinal NFTs were to lead to an increase in Bitcoin network fees, this could be good for miners, thus representing a long-term positive for Bitcoin network security. However, given that fees have yet to pick up, Bitcoin miner earnings relative to its recent history remain subdued. Glassnode’s 4-year Z-score for miner earnings from fees remains near the lowest levels it has stuck to since July 2021.
How Ordinal NFT’s Bitcoin Network Activity Can Affect BTC Price
As the Ordinal NFTs have had minimal impact on network fees so far, it can probably be assumed that the new, controversial protocol’s impact on the BTC price has so far been minimal. Meanwhile, although it has increased transaction traffic, Ordinals does not appear to have had any impact on the number of unique daily users of the Bitcoin blockchain.
Glassnode’s 14-day EMA of active addresses, which the firm defines as “the number of unique addresses that were either a sender or receiver that day,” was around 940,000 as of the 8th.th February, close to the range it has stayed within for over a year and a half.
Another indicator of network activity tracked by analysts at Glassnode, New Addresses Momentum, has been sending positive signals lately. But this positive trend started back in Q4 2022 when the collapse of FTX triggered a fall to new annual lows in the Bitcoin price, which 1) encouraged users to take care of their crypto from exchanges for the first time (meaning many new wallets ). ) and 2) attracted new users who wanted to buy the dip.
The 30-day simple moving average (SMA) for new addresses rose above the 365-day SMA for new addresses in early November and has been above it since.
So it seems that the arrival of Bitcoin NFTs via the Ordinals protocol is not yet having enough of an impact on Bitcoin network activity and adoption to affect the cryptocurrency’s price. But this is a brand new technology and its eventual impact on the Bitcoin network is yet to be seen. Bitcoin investors, regardless of their feelings towards Bitcoin-based NFTs, should look into this area.
