- Galaxy Digital warns about Bitcoin’s declining settlement activity.
- ETFs and alternate blockchains absorb Bitcoin volume.
- Shifts could undermine miner incentives and network security.
Galaxy Digital warns that Bitcoin is at risk of becoming a settlement layer with minimal activity due to declining fees and migration to ETFs and alternative blockchains.
This development threatens Bitcoin’s long-term security and economic incentives for miners, potentially altering the cryptocurrency’s role in the market.
Galaxy Digital has issued a warning that Bitcoin risks becoming a mere settlement layer with insufficient activity. This follows Bitcoin’s declining fee market and migration of activities to ETFs and alternative blockchains.
Alex Thorn, Head of Firmwide Research at Galaxy Digital, underscores this change, noting the risks due to increased movement of Bitcoin volume to other platforms. The situation could impact long-term miner incentives and network security.
The trend affects industries and individuals relying on Bitcoin’s transaction model. The shift towards ETFs and alt-blockchains could lead to lower transaction fees, reducing miners’ revenues.
The financial implications are significant. Spot Bitcoin ETFs holding around 1.3 million BTC do not generate on-chain fees, impacting Bitcoin’s economic model and ultimately posing a risk to its network security.
Without proactive measures, Bitcoin’s key attributes may be compromised. Historical fluctuations had temporary effects driven by market turnovers rather than systemic shifts like these currently experienced.
Potential outcomes suggest transformative impacts on mining economics, regulatory landscapes, and the blockchain’s future role. The growth in ETF and alt-blockchain activities marks a shift, diverting capital flows away from Bitcoin and into faster, programmable platforms.
Alex Thorn, Head of Firmwide Research, Galaxy Digital, stated, “If more BTC volume continues to migrate to ETFs, custodians, and fast alt-L1s, the core network risks becoming a settlement layer without sufficient settlement activity.”
