There’s another metric that’s important, too: unspent transaction output (UTXO). And the UTXO count of bitcoin (BTC) is ticking upwards, set to challenge its all-time high of 84.6 million from November 2022 – when there was a flurry of on-chain activity as traders tried to escape the wreckage of FTX's collapse.
UTXO refers to the individual units of bitcoin, called satoshis, or sats, that are locked in transactions on the blockchain.
When a transaction occurs, bitcoins are sent from one address to another and the remaining amount is sent back to the sender in the form of a UTXO.
These UTXOs can then be used as inputs for future transactions, essentially proving that the sender has the necessary funds to make the payment.
Now, this spike in UTXO could be explained by an increase in small, retail, interactions with bitcoin. It also shows that more individuals – as opposed to whales or large investors – are currently active on chain.
"It seems like the overall trading size of the bitcoins has decreased and investors are carefully watching how the market direction would turn out with the UTXO value bands with less than 0.01 BTC are the main reason for the significant increase in the UTXO counts,“ CryptoQuant contributing analyst Dan Lim wrote in a note to CoinDesk. “It's good progress as there are market participants tapping into the market."
UTXOs have steadily appreciated over the last two years. They experienced a brief dip during the coldest depths of the 2022 FTX-induced, end-of-year crypto winter but resumed their climb as bitcoin rallied through January.
UTXOs also tells us that despite a new, large cohort of people interacting with bitcoin thanks to Ordinals, there’s also a large group of whales HODLing. As CoinDesk previously reported, the age of UTXOs older than five years has increased by 17% in the past six months.
“Overall, the growth of the Bitcoin UTXO counts is a good thing because more exposure of bitcoins can create mass adoption in the long run," Lim said.
But the question is, what does this mean for the price of bitcoin? On one hand, a collision between a large group of stalwart HODLers and a new, growing group of retail users is, in, theory, bullish for the price of bitcoin. Others, however, aren’t so sure.
Tony Ling, co-founder of data portal NFTGo, and a partner at Bizantine Capital doesn’t think the demand from Ordinals is high enough yet to drive up the price of bitcoin even though its causing an up-tick in activity on-chain.
“There’s no mature marketplace on the Bitcoin network, so I have doubts about the real conversion and purchase demand,” he told CoinDesk in a note.
According to Ling, bitcoin's recent price rise has been fueled by an influx of USDT into bitcoin, not by increased pressure on the Bitcoin network due to ordinals.
Ling is still bullish about the price of bitcoin and expects it to reach around $30,000-$35,000 – but any attempt at testing all-time highs is not going to be until the second half of 2024.
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