On top of that, Stacks doesn't yet have all the features needed to support an ecosystem of NFT exchanges, and it faces competition from other blockchain ecosystem projects. Fundamental and technical analysis of the project suggests that the price spike may have reached overbought conditions and could be corrected in the short term.
The current development of ordinal numbers is unpredictable
Attention to registering NFTs on the Bitcoin network recently peaked after Casey Rodarmor registered NFTs on the Bitcoin network on January 29. While the trend started with an overwhelming start, minting was limited to technical users who owned Bitcoin nodes and traded primarily through OTC channels.
Compared to the Ethereum NFT market, the infrastructure for Bitcoin NFT exchanges is still significantly less developed in terms of complex activities such as decentralized trading. Many investors expressed their belief that there needed to be a way to launch marketplaces and NFT minting platforms for Ordinals.
According to a report by CoinShare, the adoption of Ordinals will again depend on society's acceptance of ways to record additional data on the Bitcoin blockchain, which is bound to bring challenges such as network congestion and increased fees.
The report goes on to review previous failed attempts to use the Bitcoin blockchain for smart contract activities, stating that "similar projects in the past have had little impact on investors and users." ”
With the explosion of instruments, the number of serial numbers engraved on Bitcoin skyrocketed in early February. However, this trend has slowed down due to the lack of trading infrastructure, with fewer than 10,000 NFTs on most days.
If the Ordinals hype grows, it remains to be seen how the Bitcoin community will respond to network congestion and an increase in Bitcoin fees.
Stacking prices rise due to speculation, while activity is sluggish
The idea is that Stacks will make Bitcoin serial numbers more accessible to users by facilitating the minting process and escrow market.
The team that manages the blockchain, the Stacks Foundation, also announced on February 22 a new upgrade to the protocol Stacks 2.1, which aims to improve the blockchain by adding EVM compatibility and synthesizing Bitcoin (sBTC) via Bitcoin Secure Bridging.
Most importantly, . The BTC naming service exists on the Stacks network if the BTC naming service exists on the Stacks network if the protocol is not valid for . Increased demand for BTC addresses, which can generate a lot of transaction activity. In its current state, . BTC Stacks addresses are largely separate from the Bitcoin network. This means that users cannot act like . ETH corresponds to addresses where bitcoins are sent and received.
After the 2.0 upgrade, Stacks will support sending Stacks assets directly to Bitcoin addresses. It will enable proxy access to the Bitcoin blockchain without the need to create a separate Stacks address. Whether Bitcoin users find the feature attractive remains to be seen.
While the upgrade sounds promising, blockchain activity is still not enough to justify the STX price spike. In February, only about 1,000 unique active wallets were using dApps on Stacks. The most striking part of Stack's usage data is that NFT marketplace Gamma has also failed to attract a large number of users to its platform, with fewer than 100 wallets traded on the market every day.
Gamma supports minting and sending Bitcoin ordinal NFTs via Stacks. However, many users experience issues related to user experience when using the feature, as it requires a separate address in the Stacks wallet, which is compatible with Ordinal. Many users mistakenly send their NFTs to the wrong address. Wallet issues also limit the trading of Bitcoin NFTs.
Developers in the Stacks ecosystem, such as the Xverse team, are working on a wallet to provide user-friendly Ordinals support. There is also an experiment underway to conduct an atomic swap between Bitcoin NFTs and STX. The aim is to develop this feature into a complete marketplace.
However, other ecosystems are also looking to capitalize on this trend. For example, Ordinex is developing an Ordinals trading platform that Ethereum users can access via Metamask. Some Ethereum-native projects, such as OnChainBirds and SappySeals, have also engraved NFTs on Bitcoin and enabled transactions on OpenSea. However, the trading activity of these collections is still very average, with little hype.
In addition to Stacks, many other ecosystems are trying to seize the opportunity by promoting Bitcoin NFTs. While Stacks enjoys a technical advantage over others, Ethereum has a loyal user base and enough liquidity to outperform the Stacks ecosystem if viable solutions emerge. And, ultimately, this will depend on how the Bitcoin community reacts and demands on these NFTs, which may not support the euphoria surrounding it.
STX/USD hit a key resistance zone
STX tokens are diluted at a rate of 2.5% per year. Inflation is expected to decrease after the Bitcoin halving that occurred in April 2024. The low supply growth rate of STX compared to other Layer 1 blockchains such as Solana and Cardano is encouraging. However, the network's total fees or token economy do not balance inflation, and this needs to change as soon as possible.
Technically, the STX/USD pair is near the top of its two-year trading range of $1.02, which is a potential yellow signal for buyers. If the bulls are able to break through this level, STX could hit an all-time high near $3.00. However, given that network activity is currently not tied to price increases, pullbacks to $0.68 and $0.24 are possible.
Similarly, the STX/BTC pair is also close to its historical range of 0.00004350 BTC, which increases the likelihood of a correction once these levels are marked. STX's downside targets are 0.00002744 BTC and 0.00001233 BTC.
Bitcoin NFTs have a lot of potential, but it's unclear whether the Bitcoin community, which typically opposes speculative and network-blocking activities, will allow this trend to flourish.
For now, the Ordinals ecosystem is still missing the most critical aspect of NFT trading – the easily accessible marketplace and wallet. As a Bitcoin sidechain, Stacks enjoys the technical advantages of integration with Bitcoin and has a slight advantage over other blockchains in terms of tools to support the Ordinals craze.
However, applications that support Ordinals are still under development. Meanwhile, Stacks faces competition from other, more liquid ecosystems that can develop more viable solutions to integrate Bitcoin NFTs onto their chains.
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