Number of Transactions

Overview

As the name suggests, this indicator displays the number of transactions for a particular crypto-asset on a given day. This data is based on what is shown in the blockchain, therefore transactions taken within exchanges are not recorded unless they occur on-chain.

For smart contract protocols such as Ethereum and Ontology, the number of transactions includes transactions that take place in tokens built on top of them. For example, if there are 200 LINK transactions, Ethereum will also record those 200 transactions as ETH is required to transfer ERC-20 tokens on-chain.

๐Ÿ’ก How can I use it?

The number of transactions partially reflects the utility obtained from a crypto-asset. While this indicator, similar to daily active addresses, tends to move along with price, a divergence between the two factors point to less speculative use and more organic use for the underlying crypto-asset.

In 2017, most crypto-assetsโ€™ transactions were very closely tied to the assetโ€™s price. This highlights the high amount of speculation that took place during the so-called ICO bubble. As the hype settled, only projects with value beyond speculation maintained their transaction activity. For example, letโ€™s look at the number of transactions for Ethereum:

Here we can observe that transaction activity was strongly correlated with price in 2017, but transactions still managed to hold a relatively high level. These two factors now exhibit a lower correlation, indicating that there has been a growth in organic demand to use ETH beyond speculating in its price.

As well, it is helpful to compare the growth in transactions versus price action to get an idea of how demand for a crypto-asset reflects on its price. For instance, in the example we see that both ETHโ€™s price and its number of transactions have roughly tripled in 2020 (as of September), pointing out that demand to use ETH directly impacts its price.

Last updated