Bitcoin’s UTXOs are near All Time High. Here’s why it matters

There is another metric that is also important: unused transaction output (UTXO). And the UTXO count of bitcoin (BTC) is ticking upwards, projected to challenge its all-time high of 84.6 million, from November 2022 – when there was a flurry of activity on the chain as traders tried to escape the wreckage of FTX’s collapse.

UTXO refers to the individual units of bitcoin, called satoshi or sats, that are locked in transactions on the blockchain.

When a transaction happens, 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 input for future transactions, essentially proving that the sender has the necessary funds to make the payment.

Now, this rise in UTXO can 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 the chain.

“It appears that the overall trading volume for bitcoins has decreased and investors are closely watching how the market direction will play out with the UTXO value bands of less than 0.01 BTC being the main reason for the significant increase in the UTXO count,” CryptoQuant Contributing analyst Dan Lim wrote in a note to CoinDesk: “There is good progress as there are market players taking advantage of the market.”

UTXOs have been steadily increasing over the past two years. They experienced a brief dip during the coldest depths of the 2022 FTX-induced crypto winter at the end of the year, but resumed their ascent as bitcoin rallied through January.

UTXOs also tell us that despite a new, large group of people interacting with bitcoin thanks to Ordinals, there is also a large group of whales holding on. 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 Bitcoin UTXO counts is a good thing because more exposure of bitcoins can create mass adoption in the long run,” adds Lim.

But the question is, what does this mean for the price of bitcoin? On the one hand, a collision between a large group of faithful HODLers and a new, growing group of retail users is in theory bullish for the price of bitcoin. Others, however, are not so sure.

Tony Ling, co-founder of the data portal NFTGo, and a partner in Byzantine Capital does not believe that the demand from Ordinals is high enough yet to increase the price of bitcoin, even if it leads to an increase in activity on the chain.

“There is 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 surge. has been driven by an influx of USDT into bitcoin, not by increased pressure on the Bitcoin network due to ordinals.

Ling remains bullish on the price of bitcoin and expects it to reach around $30,000-$35,000 – but any attempt to test all-time highs won’t be until the second half of 2024.