Bitcoin prices may be firmer as they write May 4, rising above $29,000 and breaking above local resistance levels in shorter time frames. But the average transaction size, based on the 7-day moving average, is at its lowest level in 3 years Glasnodea blockchain analytics company.
Bitcoin average transaction size is crashing
The average transaction size represents the average transaction size over a certain period. It can be used as a guide to measure activity level. The higher the demand for BTC, the better the prices.
Given the decentralized nature of public networks, including Bitcoin, transactions are packed into blocks before being confirmed and added to the longest chain.
The size of each Bitcoin block is set at 1 MB; therefore, the number of transactions that can be packed into a block directly depends on the size of each transaction. On average, BTC transactions can be between 300 and 400 bytes. Combined with the set transaction processing time of approximately 10 minutes, transaction sizes and by extension the block size limit have a direct impact on network throughput.
One notable observation is that the average transaction size in Bitcoin has dropped rapidly in recent weeks. There was a strong expansion from the end of January 2023 when the average transaction size increased from around 590 to 1,195 in mid-February.
It then fluctuated in subsequent weeks, falling from 1,192 in late March to 820 in early April. It crashed to 467,949 on May 2, the lowest in three years.
#Bitcoin $BTC Average deal size (7d MA) just hit 3-year low of 467,949
The previous 3-year low of 468,425 was observed on May 2, 2023
View statistics:https://t.co/PJ0bkLTuVs pic.twitter.com/WNZE2VmaOM
— glassnode alerts (@glassnodealerts) May 4, 2023
Blame the ordinal numbers
The first expansion at the end of January can be attributed to the launch of the Bitcoin Ordinals platform. Through the portal, individuals can add files, including texts, images, and videos, to Satoshis. After that, these files are stored in Bitcoin blocks after being confirmed by miners.
Because each file is unique and exists as a transaction, each Ordinal stored in a Bitcoin block has been compared to non-fungible tokens (NFTs), even though they are not technically NFTs. And Dune data shows that more than 3.5 million inscriptions have been added to the Bitcoin network.
While the number continues to rise, there is a clear shift in the types of files attached. In the early days of the Bitcoin Ordinals, there were more images, which were larger than texts, and other files, such as audio or applications.
Over the months this has changed and there are more text inscriptions. Texts are smaller in size than, for example, images or videos.
As such, this could explain the rapid decline in average transaction size based on the 7-day moving average, especially in the last few weeks from April 2023.
Feature image from Canva, chart from TradingView
