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Bitcoin Traces Sharp Spike Towards $25K Amid Ordinal NFTs Mania
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The crypto market has reversed February's downtrend on the back of a renewed resurgence in the last few hours, as reflected in the total market capital, which has reclaimed the $1.1 trillion mark late Wednesday.
Bitcoin breaches $24,500 for the first time in February
Bitcoin gained a whopping $2,000 to its price in the space of 7 hours starting around noon (EST time) to reach an eight-month high of $24,769 as per CoinMarketCap data. Notably, the last time Bitcoin traded near this range was on Jun 13. Though the leading cryptocurrency has since cooled off to $24,695, where it was observed at writing, it is still 11.86% up in the past 24 hours.
The green action has taken root across the altcoin markets as well, led by Ethereum's native token, Ether which was spotted at $1,690 at the time of writing. Avalanche (AVAX), Solana (SOL) and Aptos (APT) were also all trading higher double digits in the same time frame.
The latest midweek price action adds to a display of volatility since the start of the year as the broader crypto asset class attempts to break from a bearish cycle. The flagship cryptocurrency's price has benefited from several influences, including relatively constrained volatility in stocks and bonds and a weakening US dollar from a macroeconomic perspective. The emergence of and excitement around the NFT-like project, Ordinals, which launched on the Bitcoin mainnet on Jan 21 has also helped fuel the rally.
To learn more about Aptos, check out our Investing in Aptos guide.
Ordinal and other catalysts have made Bitcoin one of the most sensitive liquidity plays
Several users, developers and major brands have joined the bandwagon looking to inscribe media content on the network. Ordinals inscriptions are carried directly on satoshis, the lowest denomination of a Bitcoin and don't require a side-chain or token. These inscriptions leverage the Segregated Witness (SegWit) and Taproot upgrades. The 2017 SegWit upgrade increased Bitcoin's block capacity to four megabytes (MB), while the Taproot soft work helps verify bundled transactions below a 4 MBs threshold size.
Dune Analytics data shows that the number of inscriptions on Bitcoin's network has surpassed the 114,000 mark, with notable names like Solana NFT collection DeGods carrying out inscriptions. It is worth noting that this figure and adoption rate takes into account that inscribing is a complex process involving the maintenance of a fully synchronized Bitcoin node. On-chain data confirms that the protocol's implementation has resulted in a notable change in demand for network resources/ block space.
The rapid momentum in the number of Ordinals ‘minted' on the network resulted in taproot adoption and utilization surging to record highs over a 7DMA, as observed by Glassnode. The average block size has also increased as a result of flocking users. The upper range of mean block size has nearly doubled from 1.5–2 MB before the protocol broke out to around 3.5 MB. In addition to the uptick in Bitcoin network usage, the hype has also helped propel the count of non-zero Bitcoin addresses to a record high of 44 million, Glassnode data shows.
Concerns and benefits
The rise of the Ordinals protocol sparked a debate within the Bitcoin and broader crypto community. Notably, this is the first time the Bitcoin network has been leveraged for a use case outside monetary-related transactions, prompting push back from Bitcoin purists. Bitcoin developers especially worry that the newfound NFT project – which involves new file types entering the network – could impact the ecosystem. These critics argue that the popularity of Ordinals could create a bloat scenario by taking up block space meant to support financial transactions, resulting in a slow and expensive network.
Proponents, on the other hand, posit that the project stands to benefit the Bitcoin network in the long run, citing the higher fees resulting from the competition for block space demand. The Ordinals project has rewarded miners nearly $850,000 in BTC transaction fees thus far.
The mixed reception which has divided the community has seemingly worked for the good of the network and market. Thus far, the felt impact of the Ordinals creation has quelled criticism from the majority of longtime Bitcoin followers who consider it misleading from the vision of Satoshi Nakamoto as outlined in the whitepaper.
To learn more about Bitcoin, check out our Investing in Bitcoin guide.
Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.