Stack is one of the first blockchains to allow the printing of Ordinal Bitcoin (BTC), which puts it in a good position to benefit from the hype. However, Ordinals have caused problems from the past where Bitcoin’s maximization ideology will be tested if NFTs cause network congestion.
On top of that, Stacks has yet to deliver all the functionality needed to support the NFT trading ecosystem and faces competition from projects in other blockchain ecosystems. The fundamental and technical analysis of the project shows that the price surge may reach an overbought situation and may be true in the near term.
Current ordinal developments are unpredictable
The new focus on writing NFTs on the Bitcoin network peaked in the last month after Casey Rodarmor written and Ordinal on January 29. When the trend is taking off for the beginning a lot, minting is limited to technical users with a Bitcoin node and trading mainly takes place through the OTC channel.
Compared to the Ethereum NFT market, the infrastructure for Bitcoin NFT trading remains less developed in terms of complex activities like decentralized trading. Many investors expressed their belief that there must be a way to play the NFT market and mining platform for Ordinal.
The Bitcoin developer community has previously been discouraged from using the network for anything other than payments because it clogs space and increases transaction costs. In 2020 and 2021, many Ethereum (ETH) users are paying hundreds of dollars in fees per transaction as user activity explodes. On the other hand, the cost of Bitcoin remained at the optimal level throughout the bull run, but the use and earnings of the protocol lagged behind Ethereum.
According to the CoinShare report, the adoption of Ordinals will again be subject to social acceptance of the way to inscribe additional data in the Bitcoin block, which is bound to present 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 activity, saying that “similar projects in the past with Bitcoin have had little impact on investors and users.”
The number of Ordinals written in Bitcoin increased significantly at the beginning of February when the instrument exploded. However, the trend has slowed due to a lack of trading infrastructure, with less than 10,000 NFTs being written on most days.
Stack blockchain’s original STX token surged 256% in February, thanks to hype about Bitcoin NFTs and upcoming upgrades to the project.
It remains to be seen how the Bitcoin community reacts to the increase in network congestion and the cost of Bitcoin if the Ordinals hype grows.
Stacks price increases in speculation, while activity is low
The idea is that Stacks will make Bitcoin Ordinals more accessible to users by simplifying the process of printing and hosting the market.
The Stacks Foundation, the team that manages the blockchain, also announced a new upgrade to the protocol, Stacks 2.1, on February 22, which seeks to improve the blockchain by increasing the compatibility of EVM and synthetic Bitcoin (sBTC) through a secure bridge to Bitcoin.
On top of that, the .BTC naming service lives on the Stacks network, which can generate a lot of trading activity if the demand for .BTC addresses increases. In the current state, .BTC Stacks addresses are generally removed from the Bitcoin network. That means, users cannot send and receive Bitcoins on these addresses like their .ETH counterparts.
After the 2.0 upgrade, Stacks will enable direct sending of Stacks assets to Bitcoin addresses. It will enable proxy access to the Bitcoin blockchain without creating a separate Stacks address. It remains to be seen if Bitcoin users find the feature attractive.
While the upgrade is promising, there is still not enough blockchain activity to justify the STX price spike. Only around 1,000 unique active wallets participated in dApps on Stacks in February. The most surprising part of Stack’s usage data is that the NFT market, Gamma, has also failed to attract many users to the platform, less than 100 wallets are sold per day on the market.
Gamma supports minting and sending Bitcoin ordinal NFTs via Stacks. However, many users face UX-related issues while using the feature as it requires a separate address in the Ordinal-compatible Stacks wallet. Many users mistakenly send NFTs to wrong addresses. Wallet issues have also limited the trading of Bitcoin NFTs.
Developers in the Stacks ecosystem, like the Xverse team, are working on wallets to bring user-friendly Ordinals support. There are also experiments with atomic swaps between Bitcoin NFTs and STX in the works. The goal is to develop this functionality into a full market.
However, other ecosystems are also working on this trend. For example, Ordinex is developing the Ordinals trading platform, which will be accessible to Ethereum users through Metamask. Some original Ethereum projects, like OnChainBirds and SappySeals, have also written NFTs in Bitcoin and enabled trading on OpenSea. However, the trading activity of the collection remained average, with little hype.
Besides Stacks, many other ecosystems are trying to capitalize on this opportunity by facilitating Bitcoin NFTs. While Stacks has a technical advantage over others, Ethereum has a loyal user base and sufficient liquidity to overcome the Stacks ecosystem if a viable solution is found. Moreover, in the end, it will depend on the response and demand of these NFTs from the Bitcoin community, which may not support the euphoria around.
STX/USD reached the main resistance zone
STX tokens are diluted at a rate of 2.5% per year. Inflation will decrease after Bitcoin halving, which is expected to happen in April 2024. The rate of increase in STX supply is low compared to other layer-1 blockchains like Solana and Cardano, which is encouraging. However, the total cost of the network or the token economy does not keep pace with inflation, which needs to change quickly.
Technically, the STX/USD pair is near the top of its two-year trading range at $1.02, which is a potential yellow flag for buyers. If the bulls can break this level, STX could take a shot at an all-time high near $3.00. However, since the network activity has not been related to the price increase, there is a possibility of a pullback to $0.68 and $0.24.
In addition, the STX/BTC pair is also close to the 0.00004350 BTC range, which increases the possibility of a correction if the level is tagged. The downside targets of STX are at 0.00002744 BTC and 0.00001233 BTC.
Bitcoin NFTs have a lot of potential, but it is still not clear that the Bitcoin community, which is usually against speculation and activities that block the network, will allow the trend to develop.
Currently, the most important aspect of NFT trading – an easily accessible marketplace and wallet – is still missing from the Ordinals ecosystem. As a Bitcoin sidechain, Stacks enjoys a technical advantage with Bitcoin integration and has a slight advantage over other blockchains in providing tools to support the Ordinals craze.
However, applications to support Ordinals are still under development. Meanwhile, Stacks faces competition from other, more fluid ecosystems that can develop more viable solutions to integrate Bitcoin NFTs on-chain.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making decisions.