What Bitcoin's Velocity Says About Its Future

Bitcoin’s on-chain velocity—how often coins move—is at decade lows. To some, that’s a red flag: has Bitcoin lost momentum? Is it still being used?

In fact, falling velocity may be the clearest signal yet that Bitcoin is maturing, not stagnating. Instead of circulating like cash, Bitcoin is increasingly being held like gold.

A Shift in Function

In traditional economics, velocity refers to how often money changes hands; it’s a proxy for economic activity. For Bitcoin, it tracks how frequently BTC is transacted on-chain. In Bitcoin’s early days, coins moved frequently as traders, early adopters, and enthusiasts tested its use cases. During major bull runs, like those in 2013, 2017, and 2021, transaction activity spiked, with BTC flowing quickly between wallets and exchanges.

Today, that has changed. More than 70% of BTC hasn't moved in over a year. Transactional churn has slowed. At face value, this could seem like declining usage. But it reflects something else: conviction. Bitcoin is being treated as a long-term asset, not just a short-term currency. And that shift is driven largely by institutions.

Institutional Adoption Locks Up Supply

Since the launch of US spot Bitcoin ETFs in 2024, institutional holdings have soared. As of mid-2025, spot ETFs hold over 1.298 million BTC, approximately 6.2% of total circulating supply. When including corporate treasuries, private companies, and investment funds, total institutional holdings approach 2.55 million BTC around 12.8% of all Bitcoin in circulation. These assets remain largely static, stored in cold wallets as part of long-term strategies. Firms like Strategy and Tesla are not spending their Bitcoin; they’re holding it as a strategic reserve.

That’s bullish for scarcity and price. But it also lowers velocity: fewer coins circulating, fewer transactions happening on-chain.

Off-Chain Usage Is Rising and Harder to See

It’s important to note that on-chain velocity doesn’t capture all of Bitcoin’s economic activity.

On-chain velocity only tells part of the story. Increasingly, Bitcoin’s real economic activity is happening off the base layer, and outside traditional measurements.

Take the Lightning Network, THE Bitcoin’s Layer-2 scaling solution which enables fast, low-cost payments that bypass the main chain entirely. From streaming micropayments to cross-border remittances, Lightning makes bitcoin usable in everyday scenarios, but its transactions don’t appear in velocity metrics. As of mid-2025, public Lightning capacity surpassed 5,000 BTC, reflecting a nearly 400% increase since 2020. Private channel growth and institutional experimentation suggest the real number is much higher.

繼續閱讀Similarly, Wrapped Bitcoin (WBTC) is enabling BTC to circulate across Ethereum and other chains, fueling DeFi protocols and tokenized finance. In the first half of 2025 alone, WBTC supply grew by 34%, a clear signal that bitcoin is being deployed, not dormant.

And then there’s custody: institutional wallets, ETF cold storage, and multisig treasury tools allow firms to hold BTC securely, but often without moving it. These coins may be economically significant, yet they contribute nothing to on-chain velocity.

In short, Bitcoin is likely more active than it appears, it’s just happening outside traditional velocity metrics. Its utility is shifting to new layers and platforms- payment rails, smart contract systems, yield strategies—none of which register in traditional velocity models. As Bitcoin evolves into a multi-layer monetary system, we may need new ways to measure its momentum. Falling on-chain velocity doesn’t necessarily mean usage is slowing. In fact, it might just mean we’re looking in the wrong place.

The Trade-Off Behind Low Velocity

While slow velocity reflects conviction and long-term holding, it also presents a challenge. Fewer on-chain transactions mean fewer fees for miners: a growing concern after the 2024 halving, which cut block rewards in half. Bitcoin’s long-term security model depends on a healthy fee market, which in turn relies on consistent economic activity.

There’s also the question of perception. A network where coins rarely move can start to resemble a static vault rather than a dynamic marketplace. That may strengthen the “digital gold” thesis but weakens the vision of bitcoin as usable money.

This is the core design tension: Bitcoin aims to be both a store of value (digital gold) and a medium of exchange (peer to peer cash) . But those roles don’t always align. Velocity is the measure of that push and pull, this ongoing struggle between preservation and utility, and how Bitcoin navigates it will shape not just usage patterns, but its role in the broader financial system.

A Sign of Maturity

In the end, falling velocity doesn’t mean Bitcoin is being used less. It means it’s being used differently. As Bitcoin gains value, people are more inclined to save it than spend it. As adoption grows, infrastructure moves off-chain. And as institutions enter, their strategies center on preservation, not circulation. The Bitcoin network is evolving. Velocity isn’t vanishing; it’s going silent, reshaped by a changing user base and new layers of economic activity.

If velocity ticks up again, it could mark a resurgence of transactional use; more spending, more movement, more retail involvement. If it stays low, it suggests Bitcoin’s role as macro collateral is taking firm root. Either way, velocity offers a window into Bitcoin’s future. Not as a coin to spend, but as an asset to build on.

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