Bitcoin transaction fees are usually an indication of how holders move their coins. When the network becomes congested due to a high number of transactions, the transaction fees increase, which indicates high traffic on the network. Transaction traffic is typically high around bull markets when the price of the digital asset rises. This usually results in a sell-off when investors try to take profits.
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One thing, this recent bull market was far from common. So many things that are normal in bull markets didn’t happen in this bull market. One example is the falling reserves on the stock exchanges. A surge in Bitcoin would often trigger an increase in foreign exchange reserves with the bull market, which happens as investors try to sell their coins. However, this bull market has shown the opposite. Foreign exchange reserves have fallen, and at the same time Bitcoin transaction fees are at an annual low, suggesting that investors are making fewer transactions on the blockchain.
Transaction fees decrease
The current climate for Bitcoin transaction fees is at a level not seen since last year. Fees, which rose after the major miners’ migration from China, have now decreased to pre-2021 levels. Competition for block space due to the reduced hashrate had resulted in Bitcoin’s transaction fees increasing by around 50% in July 2021. But when the miners are back online and the hashrate picked up, the fees on the network fell again.
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Current network activity shows that there is now less need for block space on the blockchain. This is unique in that bull markets are typically where the demand for block space is highest. The last couple of bull markets have all shown similar trends. Bitcoin’s transaction volume has skyrocketed in previous bulls, leading to higher demand for block space and higher transaction fees.
BTC transaction fees decrease | Source: Arcane Research
Currently, the average transaction fee for Bitcoin transactions is $ 3. Average transaction fees haven’t been this low since October last year, when the average fee was $ 3. Compared to April when the bull market was in full swing, the average transaction fee was $ 61. Competition for block space was fierce as investors shifted their assets.
How this affects the Bitcoin price
Like any other asset, the price of the digital asset is tied to the demand for the asset. Given the current transaction fees and transaction volumes, this shows that investors are not moving too much of their digital assets. Hence, it suggests a stronger hold mood among investors. This could mean the continuation of the bull market. Maybe one last bull run before the market finally gives way to the bears.
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The hold sentiment has always been important when it comes to the price of the digital asset. This shows that Bitcoin investors are more inclined to buy more coins than sell their existing supply. This leads to a tightening of the market, which is reflected in the decreased foreign exchange reserves, which have also reached an annual low. Scarcity inadvertently increases the value of an asset. Playing according to the basic laws of economics.
BTC ready for another $ 48,000 re-test | Source: BTCUSD on TradingView.com
Bitcoin’s price is currently over $ 48,000. A successful test of the $ 48,000 resistance point had caused the asset to climb $ 400 above it before losing its grip and falling back below that crucial point. The indicators are still showing a positive upward trend in the price of the asset. Possibly a green end at the end of the weekday trading day.
Featured image from CNBC, chart from TradingView.com