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Breaking News: Bitcoin Hits ATH Of $112,000, Expert Predicts Rally Is Just Beginning
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Breaking News: Bitcoin Hits ATH Of $112,000, Expert Predicts Rally Is Just Beginning

Bitcoin Transaction Fees Hit One-Year Lows, How Does This Affect The Price?

Best Owie
Best Owie
1 year ago
3 mins read
Picture of a gold bitcoin with a stack of gold bitcoins next to it and a red downward trend line behind it

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Bitcoin transaction fees are usually an indication of how holders are moving their coins around. When the network gets congested due to a high number of transactions, the transaction fees go up, indicating a high volume of traffic on the network. Transaction traffic usually is high around bull markets when the price of the digital asset is up. Usually leading to a sell-off as investors try to take profits.

Related Reading | Bitcoin Suffers As Mid Caps Cryptos Establish Market Dominance With Wide Margin

One thing, this recent bull market has been anything but usual. So many things that are normal around bull markets have not happened with this bull market. An example is the declining reserves on exchanges. Bitcoin going up would often trigger an increase in the exchange reserves with the bull market, which happens because investors are trying to sell off their coins. This bull market, however, has shown the opposite. Exchange reserves have plummeted, and along with it, bitcoin transaction fees are at one-year lows, indicating that investors are carrying out fewer transactions on the blockchain.

Transaction Fees Plummet

The current climate for bitcoin transaction fees has been at levels not seen since last year. The fees which had spike following the great miner migration out of China have now dropped back to pre-2021 levels. Competition for block space due to the reduced hashrate had seen the transaction fees of bitcoin go up by about 50% in July of 2021. But as miners have come back online and the hashrate has picked up, fees on the network have dropped again.

Related Reading | MicroStrategy Deepens Its Crypto Bet With Another $240 Million Spent On Bitcoin

Current network activity shows that there is now less demand for block space on the blockchain. This is unique in the fact that during bull markets, demand for block space is usually at its highest. The last couple of bull markets have all shown similar trends. Bitcoin transaction volumes have spiked in previous bulls, leading to higher demand for block space, leading to higher transaction fees.

Chart showing bitcoin transaction fee levels in conjunction with price

BTC transaction fees plummet | Source: Arcane Research

Presently, the average transaction fee for bitcoin transactions sits at $3. Average transaction fees have not been this low since October last year when the average fee was $3. Comparing this to April, when the bull market was in full force, the average transaction fee had been $61. Competition for block space was high as investors moved their assets around.

How This Affects Bitcoin Price

The price of the digital asset, like any other 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 around. Hence, it points towards more hold sentiment amongst investors. This could spell the continuation of the bull market. Maybe one last bull run before the market finally gives in to the bears.

Related Reading | New To Bitcoin? Learn To Trade Crypto With The NewsBTC Trading Course

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 instead of selling their existing stash. Thus creating scarcity in the market, which is evidenced by the decreased exchange reserves, which have also hit one-year lows.  Scarcity inadvertently leads to a higher value for an asset. Playing to the basic laws of economics.

Bitcoin price chart from TradingView.com

BTC ready for another $48,000 retest | Source: BTCUSD on TradingView.com

The price of bitcoin is currently above $48,000. A successful test of the $48,000 resistance point had seen the asset climb $400 above this, before losing hold and falling back below this crucial point. Indicators still show a positive upward trend in the price of the asset. Possibly a green close by the end of the midweek trading day.

Featured image from CNBC, chart from TradingView.com
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Best Owie
Best Owie

Best Owie

Best Owie is a seasoned managing editor with a wealth of experience currently serving as the Managing Editor at NewsBTC. Best is a highly skilled professional with a track record of producing engaging and informative content. With a keen eye for detail and a passion for accuracy, Best is committed to ensuring that each article published meets the highest standards of quality.

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Best has over six years of experience in the crypto industry and has overseen the creation and publishing of thousands of articles over the years. Best is always abreast of everything that is going on in the crypto industry in order to create and curate the most relevant content for readers. This shines through in Best’s publications, which are always clear and concise, enabling easy reading and understanding for all.

Best is also an avid learner and advocate for new technology. This has seen Best dive into topics in areas such as decentralized finance (DeFi), non-fungible tokens (NFTs), Layer 2 blockchains, etc. In addition to this, Best is a vocal member of the crypto community across various social media platforms such as X and Reddit. Best’s work garners tens of thousands of readers monthly, who rely on the information in these publications to keep up-to-date with everything happening in the crypto community.

Best’s articles explore breaking news, intricate systems such as yield farming, liquidity pools, and other decentralized finance (DeFi) systems. This is because Best understands the importance of information to gaining financial freedom and believes that everyone should have access to this information.

Best also believes in leveraging the blockchain for philanthropy to create the most positive social impact. This involves work with charitable organizations focused on financial literacy and education. With each article, Best lends a voice to important issues such as a more financially inclusive future, transparent systems for growth and development, and technology that is not self-serving but one that serves all of humanity.

When not curating engaging content, Best can be found reading a book with a cup of hot chocolate, enjoying a Netflix series, or exploring the outdoors with Green - the world’s most quiet and well-behaved Husky. Best’s interests also span other industries such as art, finance, and security, attending seminars and conferences in not just the crypto industry but other industries as well.

As an animal lover, Best is also involved with charities for animals, local shelters, and rescues. Best is also involved in local events that promote inclusivity, such as being a prominent member of hiking clubs and a cycling club, as well as being a part of a very happy group of animal lovers.

Best is a true professional in every sense of the word, with an exceptional dedication to producing high-quality work. This shines through in Best's work on and off the clock. These include advocating for inclusive crypto education for all, the impact of financial illiteracy, and the benefits of adopting new technologies such as cryptocurrencies. Best’s prolific career in the media industry is a testament of how hard work and dedication pays.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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