A Weekly Digest of Bitcoin News & Insights

Greg Cipolaro, Global Head of Research at NYDIG

Jul 11, 2025

IN TODAY'S ISSUE:

• As bitcoin hits a new high, we examine what network activity reveals about the cycle and the changing face of Bitcoin users. 
• A jump in short futures liquidations highlights the defensive position of traders. 
• The reawakening of a long-dormant whale has sparked a wave of speculative and fanciful theories across the community.

Network Activity Points to Increased Financialization of Bitcoin

As bitcoin pushes to new all-time highs once again this week, many investors are turning to network data in search of clues about where the market might be headed next. Some observers have flagged the relatively subdued transaction volumes and persistently low network fees as potential red flags, suggesting the cycle may be in danger. 

In this piece, we examine several key indicators of on-chain activity to gain a deeper understanding of what the data reveals about the current phase of the market cycle. Our analysis finds that, indeed, many network-level metrics remain muted when compared to the peaks observed in previous bull markets. However, we don’t view this as a cause for concern. Rather, we believe the apparent quietness on-chain is largely structural and reflects two key developments: the post-Taproot inscription hangover and the ongoing financialization of Bitcoin. 

The current disconnect between price action and on-chain metrics does not necessarily imply price weakness. Instead, it may simply reflect Bitcoin's maturation and the changing nature of its user and investor base.

Mempool Dwindles

Bitcoin’s mempool (memory pool), the global waiting room of unconfirmed transactions, has seen a marked decline even as bitcoin’s price has risen. We think there is one main factor at play here: the decline in Taproot-enabled data transactions (inscriptions), like Ordinals, BRC-20s, and Runes. The launch of Ordinal inscriptions in early 2023, followed by BRC-20s, and then Runes launched a flurry of network activity, as users rushed to create and purchase memecoins and NFTs. This materially altered the size of mempool (measured in virtual bytes) as well as the fee rates (sats/vb), denoting the urgency of transactional data. At its peak, inscription transactions accounted for half of the block size. Today, that figure is now less than 5%. 

Block Size Declines

With the drop in inscriptions, the average bitcoin block size has declined as well. Bitcoin has a maximum block size of 4 MB, and with the advent of Taproot inscriptions, numerous blocks hit or approached that limit. But now with the craze over, the average block size is on the decline. 

Fees Subdued in the Wake of Ordinals

Since the launch of Ordinals in early 2023, followed by the introduction of BRC-20 tokens and Runes later that year, transaction fees on the Bitcoin network have decreased. This trend reflects a broader drop in demand for block space, as evidenced by the reduction in average block size. At its core, Bitcoin functions as a data transmission layer. When demand for transmitting data, whether it be financial transactions or non-monetary content like files or video, wanes, the fees paid to miners naturally decline as well.

Active Addresses Flat to Down

Daily active addresses, a proxy for unique network users, have remained flat or declined throughout the current cycle. This marks a departure from the pre-2022 trend, when the number of active addresses typically rose in tandem with price. That historical correlation now appears to be weakening, indicating financial activity may increasingly be moving off-chain. We see evidence of this in the growing popularity of spot ETFs as well as corporate treasury adoption of bitcoin. These actors do not tend to have heavy transactional activity, moving bitcoins once per day in the case of ETFs or only when buying (or selling) to corporate treasuries, which are long-term focused. 

Transfer Volumes Tracking Along with Spot

Although many on-chain metrics remain relatively subdued, one notable exception is transfer volume (measured in dollar terms and adjusted for unique entities), which continues to trend higher. This growth implies that while the number of users and raw data throughput may not be growing in line with bitcoin’s price, the average transaction size is increasing. This suggests growing participation from institutional players or large holders, such as ETF providers or corporate treasuries. These entities typically move capital in large, infrequent chunks, rather than in the high-frequency, small-value transactions often associated with individual or retail users.

Relationships Could Be Breaking Down

Network activity has largely remained flat or declined, even as bitcoin has reached new all-time highs. Part of this stagnation is the aftermath of the surge sparked by the launch of Taproot-based inscriptions in 2023. But a deeper shift appears to be underway, one driven by the growing financialization of bitcoin. With the rise of ETFs, corporate treasuries, and long-term institutional holders, a larger share of bitcoin is being acquired and held in long-term storage, with less on-chain movement thereafter. 

A Surge in Short Liquidations Helps Propel Bitcoin to New Highs

Short futures liquidations jumped this week as bitcoin broke through key price levels, fueling its climb to new all-time highs. The scale of these liquidations was significant, ranking among the largest on record. This surge in short liquidations highlights the defensive positioning of traders and indicates that this current rally may have more room to run. 

Looking at this past week, short liquidations ticked up as bitcoin passed through 3 key price levels - $112K, $113K, and $116K. The liquidations were modest at $112K and $113K but jumped sharply at $116K. The price action since $116K, which took bitcoin to nearly $119K appears to be light on forced short liquidations. 

Viewed in a broader historical context, the magnitude of short futures liquidations that bitcoin experienced this week stands out as one of the most significant ever recorded. On July 10th, the market saw approximately $326 million in short position liquidation, marking this the third-largest single-day short liquidation event in bitcoin’s history. Only two prior instances have surpassed this figure: $388 million on February 8, 2021, and $511 million on April 2, 2019. 

The scale of this liquidation wave underscores just how defensively traders were positioned against the rally, and how they can affect prices if key levels are breached. This capitulation by short sellers added significant fuel to bitcoin’s ascent, helping drive the price to a new all-time high.

Speculation Runs Wild as Long-Dormant Whale Moves Coins

On July 4th, 80,000 bitcoins believed to be connected to a long-dormant whale moved on-chain for the first time since 2011. The transfers, valued at over $8B, sparked widespread attention, raising questions, speculation, and concerns across the community. Much of the commentary was based on specious reasoning, and we aim to clarify what is known with certainty and offer our perspective on what may be unfolding.

Spamming Messages Ahead of Transfers

In the days leading up to the July 4th transfers, unusual activity was seen on July 2nd, when messages were broadcast to long-term bitcoin holders using the OP_RETURN data field. These messages appeared to warn the recipients that their bitcoins had been seized, that ownership proof would require an on-chain transaction, and directed them to the “Salomon Bros” website, which displayed a notice claiming that the wallet had been abandoned and control had been taken over by their client. The sequence of messages read as follows:

• LEGAL NOTICE: We have taken possession of this wallet and its contents
• Not abandoned? Prove it by an on-chain transaction using private key by Sept 30
• NOTICE TO OWNER: see www.salomonbros.com/owner_notice

Some of the addresses associated with the “July 4th Whale” that moved bitcoins also received a sequence of numbers—4 8 15 16 23 42—an iconic and repeating theme from the TV show Lost, meant to reinforce the concept of destiny and control. 

Legal Notices Sent to Numerous Addresses

Blockchain data reveals that the 8 addresses linked to the July 4th Whale were not the only recipients of the legal notice messages. The sender appears to have broadly disseminated these messages to numerous high-balance addresses that had remained dormant for years, including one associated with the Mt. Gox hack, which holds 80,000 bitcoins. Notably, many of these addresses did not move their funds in response. This suggests a pattern of indiscriminate messaging by the sender. This is one example of the message sender spamming addresses: link

This leads us to believe the message sender was bluffing, hoping to scare the recipients into moving their bitcoins. If they really had taken control of “abandoned” private keys, they would have moved all bitcoins in the message destination addresses, not just some of them. 

"Lost" Messages Appear to be Unrelated Spam

What about the mysterious “Lost” numbers? These messages appear to come from one single address and weren’t sent to every one of the July 4th Whale addresses. The blockchain further reveals that the sending address is involved in numerous spam and low-quality transactions—BRC-20s, OP_RETURN messages, and Runestones. We don’t know the purpose of these transactions, but even the Lost numbers went to other addresses not associated with the July 4th Whale. These Lost messages and the legal notice messages were sent on separate days, too, leading us to believe there’s a high probability they aren’t related and likely just a coincidence. Link to the “Lost” message sender’s address: link

“Salomonbros.com” Website Prompts Intrigue

What about the mysterious Salomonbros.com website? First, we advise users not to visit the Salomonbros.com website. While it may be legitimate, the likelihood that it is not is high for the following reasons: 

• The site features vague, outdated content, including boilerplate copy, stock imagery.
• The "Views and Research" section hasn't been updated in over two years.
• The individuals named as part of its “Advisory Board” appear to have once worked at Salomon Brothers many years ago, but no longer do, according to their LinkedIn profiles.
• One advisory board member has his name spelled incorrectly.
• The “legal notice” on the URL sent in the on-chain message has a notable inconsistency in dates. The website states that wallet owners must respond by October 5, 2025, while the on-chain message specifies a deadline of September 30, 2025.
• The legal language on the site is poorly written and lacks the polish typical of genuine legal notices.
• The claim that bitcoin in the wallet is "abandoned" and thus can be freely claimed by a third party has no known legal precedent under U.S. or international law

At best, the Salomon website appears to be a low-effort placeholder. At worst, it could be malicious, potentially part of a phishing operation. Our current assessment is that this could be an attempt to trick rightful owners into revealing personal information, potentially as part of a broader strategy to identify and exploit them in the future. A historical version of the website is available here: link

What the Whale Movements Suggest

Following the receipt of the on-chain messages, the July 4th Whale engaged in several on-chain transactions across both Bitcoin and Bitcoin Cash. The private keys associated with 80,000 bitcoins are also associated with a similar amount of bitcoin cash, which we can connect because their ownership dates to 2011, well before the 2017 hard fork (the addresses are different because of how Bitcoin Cash encodes addresses). Our assessment by looking at the on-chain activity demonstrates the competence (using both chains) and confidence (making large single balance transfers without sending test transactions) of an experienced user. There is no evidence that private keys had been compromised or that the wallet associated with these addresses was somehow exploited. 

The timeline of events with the movement of coins follows as such:

• 0n 7/3, the user first sends 10,000 BCH onto a new address.
• An hour later, the user sends 10,000 BTC to a new P2PKH address using the same private key as the first BCH transaction.
• In successive transactions over the next 11 hours, the user sends 70,000 BTCs to new SegWit (P2WPKH) addresses. This is a different address format from the first BTC destination address.
• Following the movement of all their BTCs, the user signs 7 transactions, moving the remaining 70,000 BCH, which are confirmed in the same block. 

The first transaction in the observed Bitcoin activity stands out as an anomaly - the whale opted to send funds to a legacy P2PKH address instead of a more modern SegWit format, which is where the subsequent transactions went. The reason for this choice remains unclear. It may simply have been a user error or oversight. 

Despite this irregularity, we can link this address to others in the broader transaction set. Blockchain data shows that this address was initially funded by the same source as some of the other addresses back in 2011. Given this shared funding history, it seems unlikely that multiple whales are involved.

Final Thoughts

There’s been no shortage of imaginative theories surrounding the July 4th Whale, from riddles about free will and control inspired by Lost, to claims of broken entropy in old wallets, to a supposedly resurrected Wall Street firm issuing abandoned property notices. While entertaining, these ideas are largely unsupported. When examined closely, they quickly unravel, often built on coincidence, misunderstandings of legal frameworks, and specious reasoning.

In our experience, the simplest explanation is usually the right one. Our view is that this is likely a sophisticated phishing campaign, carefully crafted to unsettle long-term holders into revealing sensitive information, potentially exposing them to future attacks. Extraordinary claims require extraordinary evidence, and unfortunately for the more imaginative explanation out there, that level of proof does not exist. 

Market Update

Bitcoin surged to a new all-time high this week, reaching $118,909 on Coinbase early Friday morning before experiencing a modest pullback. The rally was fueled in part by a wave of short liquidations, which helped upward momentum as traders were forced to cover their positions. Broader market sentiment also played a role, as the appetite for risk assets remains high across the board. Both the S&P 500 and the Nasdaq 100 set new record highs this week. In contrast, traditional risk-off assets were flat to down on the week. Gold declined 0.5% and the bond markets were largely flat.

The spot bitcoin ETFs had a big week, with Thursday inflows being the second highest in their history, at $1,179 million. Given the delay in processing creation/redemption orders that IBIT operates under (t-1), the ETFs could see another big day of inflows again on Friday. 

When looking at signs of trader positioning, things don’t look overheated just yet, suggesting this rally could continue. The annualized basis for front-month CME futures is still under 10% and the annualized open interest weighted funding rate on perpetual swaps is only 13.3% (0.0114%/8h). These numbers have historically peaked at much higher levels than those at speculative peaks. 

Important News This Week

Investing:

Why an RIA Founder is Suggesting a 10-40% Crypto Allocation - Blockworks

BlackRock Bitcoin ETF Drives More Revenue Than Its S&P 500 Fund - Bloomberg

Franklin Templeton Flags Uncertain Outlook for Crypto Treasury Firms, Citing ‘Dangerous’ Feedback Loop Risk - The Block

Regulation and Taxation:

Trump's Crypto Link with Binance Raises Conflict of Interest Questions - Bloomberg

How Crypto Lobbying Won Over Trump - NYT

Circle Applies for US Trust Bank License After Bumper IPO - Reuters

Companies:

Trump Media Files Registration Statement for Crypto Blue - Trump Media

Ego Death Capital Closes $100M Fund for Bitcoin-Only Projects - CoinDesk

ReserveOne, Backed by Crypto Heavyweights, Set to Raise Over $1 Billion In Nasdaq Listing - Reuters

Kraken and Backed to Expand xStocks Support to BNB Chain Alongside Solana - The Block

Bankruptcy Judge Allows Celsius to Proceed with Claims Against Tether in $4.3B Dispute - The Block

Upcoming Events

Jul 15 - CPI release
Jul 22 - EO Working Group report deadline

Jul 25 - CME expiry
Jul 30 - FOMC interest rate decision 

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