Bitcoin has taken a dip below the $100,000 mark amidst a whirlwind of volatility in the broader crypto market.
This decline has paralleled a significant drop in transaction activity on the Bitcoin network, with the memory pool (mempool) volume hitting its lowest level since March 2024.
Market Turbulence Wipes Away Half a Billion in Liquidations
In the past 24 hours, Bitcoin slipped below $100,000, losing over 4% of its value and touching $98,000 briefly. According to BeInCrypto data, Bitcoin surged to $102,000 initially before succumbing to selling pressures.
The market downturn reflects wider volatility, with the total crypto market cap witnessing a 5% loss. Major cryptocurrencies like Ethereum, Solana, and BNB also saw significant declines, each plummeting over 7%.
The spike in volatility triggered a series of liquidations surpassing $555 million in leveraged positions, as reported by CoinGlass. More than 239,000 traders faced forced liquidations, with long traders suffering the highest losses at $491 million, while short traders lost about $63 million.
Crypto Market Liquidation. Source: Coinglass
The turmoil followed the US President's decision to impose strict tariffs on major trading partners, including Canada.
The move, aimed at curbing undocumented immigration and illicit substance flow, has raised concerns about inflation among American consumers.
In response, Canadian Prime Minister announced the imposition of 25% tariffs on $106 billion worth of American imports.
The first batch of levies, targeting $30 billion goods, will be effective immediately, with an additional $125 billion to follow in the upcoming weeks.
Decline in Bitcoin Network Transactions
Alongside market unrest, Bitcoin's network activity has seen a sharp decline, with the mempool – the area for unconfirmed transactions – registering a significant decrease in volume.
On February 1, CryptoQuant data revealed an almost empty mempool, marking a stark reduction in transaction volume. The data also indicated a drop in Bitcoin transaction fees to 1 sat/vB, signalling reduced demand for block space.
This decline represents the lowest transaction activity level since March 2024.
Bitcoin Mempool Transaction Count. Source: X/Moreno
The diminishing transaction activities have sparked concerns about Bitcoin's utility as a medium of exchange, with some analysts questioning its growing perception as digital gold, potentially discouraging transaction use.
Bart Mol, host of the Satoshi Radio Podcast, criticized this shift, warning against celebrating an empty mempool, likening it to a foundational flaw that could erode Bitcoin's core functionality.
While Bitcoin gains traction as a reserve asset, concerns arise regarding its role beyond being a digital gold reserve, amidst the continuous drop in on-chain activities.