Bitcoin fees remain low despite the price hike, but Vitalik says they could go up

189
SHARES
1.5k
VIEWS
ADVERTISEMENT

Related articles


Despite Bitcoin’s surge to retest 2017 highs, transaction fees remain low due to a combination of low transactions in the chain and decreased speculation in retail.

The current fees of around $ 3.50 per transaction are in stark contrast to three years ago, when the fees for sending a BTC amount briefly rose above $ 50. However, average transaction values ​​are currently approaching $ 200,000, suggesting the current rally was not accompanied by the same retail frenzy that drove prices up to $ 20,000 in 2017.

Ethereum co-founder Vitalik Buterin doesn’t think Bitcoin’s current low fees will continue. In a Twitter thread, Ethereum’s co-founder suggested that an inevitable increase in transaction fees will crowd out the majority of users:

“Why are Bitcoin’s unique features important, as any broad adoption scenario will result in most of these users paying basic chain fees and proving difficult to extend these features to the L2s to get around these limitations?”

However, the data does not suggest that high fees are likely in the current environment. To understand what is happening in the background, it is important to study the number of transactions processed, the value of those transactions, and the long-term retention of BTC.

Bitcoin’s storage pool, similar to a transaction waiting room, shows the current number of daily unconfirmed transactions at 38,900 – only around 20% of the 2017 numbers.

Number of mempool transactions. Source: Blockchain.com

It should be noted that not only is the number of transactions significantly less than during the previous bull market, but this time the reaction to the price surge has not increased either. In fact, the seven-day moving average has been showing a general decline since early 2019.

Confirmed transactions per day. Source: Blockchain.com

In October, the average Bitcoin transaction surpassed the 2017 high of $ 150,000. Ten days ago, the average was over $ 190,000, suggesting that while the number of transactions has decreased, the transactions are still wealthier individuals or organizations.

Bitcoin users are also rushing their coins instead of trading them this time. The number of Bitcoin held on exchanges has rapidly decreased. Data from the Glassnode Studio analytics platform shows the year-to-date change as of November 21st, down 18%.

The chain analysis found that the number of bitcoin available to buyers could only be 3.4 million while the rest of the supply is held by long-term investors.