The Lightning Network is a Layer-2 solution designed to address Bitcoin transactions’ scalability and speed issues. It creates off-chain payment channels that allow users to conduct transactions almost instantly and at a fraction of the cost compared to traditional on-chain methods.

By enabling multiple transactions to occur off-chain and only recording the final balance on the main blockchain, it can alleviate congestion and reduces fees, making microtransactions more viable and enhancing the overall efficiency of the Bitcoin network.

The growth of the Lightning Network can indicate more people are using Bitcoin for everyday transactions, a sign of wider cryptocurrency adoption. Changes in the Lightning Network can also reflect shifts in market sentiment — a sudden increase in capacity could indicate a bullish sentiment as more users seek access to quick and cheap Bitcoin transactions, and vice versa.

Lightning Network capacity refers to the total amount of Bitcoin transacting within the network at any given time. A decrease in capacity could hinder the network’s ability to process many transactions. According to Glassnode, the Lightning Network’s capacity dropped significantly between July and August, decreasing by almost 13% in the past 30 days.

Earlier this week, Bitcoin broke above the $27,000 barrier on the news about Grayscale’s court victory against the SEC.

The decision marks a pivotal win for Grayscale and carries profound ramifications for upcoming spot Bitcoin ETF applications. As highlighted by CryptoSlate earlier, the court’s verdict on this case might influence the outcome of several spot Bitcoin ETF applications submitted earlier in the year.

Grayscale’s victory also seems to have bolstered the confidence of Bitcoin traders. This renewed confidence is seen in the futures market, where on-chain indicators have shown a notable uptick in leverage.

The Estimated Leverage Ratio (ELR) is a crucial metric that offers insights into the level of risk traders are willing to assume. It represents the ratio of the open interest in Bitcoin futures contracts to the Bitcoin balance of the corresponding exchange. A rising ELR suggests that traders leverage their positions more, indicating an increased appetite for risk.

The Estimated Leverage Ratio (ELR) experienced a jump from 0.22 to 0.25 on Aug. 30, following Bitcoin’s jump from $26,100 to $27,700.

Digital asset investment products recorded significant outflows totaling $168 million last week, marking its largest outflow since March, according to CoinShares’ latest weekly report.

CoinShares analyst James Butterfill attributed the substantial deficit mainly to recent delays by the U.S. Securities and Exchange Commission (SEC) in deciding a multitude of pending spot BTC ETF applications.