Bitcoin on-chain activity has been on the rise for the past week. It has seen transactions grow more than 70% in the same time span. Despite all of these though, bitcoin fees have continued to remain low. This has persisted through a steady rise in average transactions per block and the number of transactions per day. Why has it remained so?
Bitcoin Fees Remain Low
The average transaction volume for the past week had grown by a tremendous 76% and saw more than 830,000 BTC being moved on the blockchain on a daily basis. It is one of the highest surges ever recorded and had in fact pushed the daily average to a new 11-year high. The last time that the network saw 830,000 BTC being transferred daily had been in 2011, which helps to paint a picture of just how high this volume is.
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Nevertheless, bitcoin fees have remained low despite this increase. It is naturally expected for fees to begin rising when activity on the blockchain surges. This is due to the fact that higher network activity would see more users competing to have their transactions confirmed.
Fees stay low despite high transaction volumes | Source: Arcane Research
This increase in transaction volume indicates that bitcoin remains in high demand and high demand leads to higher on-chain transactions. However, the fees do not reflect this as they have remained low for the past week. There was a bit of an increase but it was nothing noteworthy as transaction fees had only grown to slightly above the $2 mark.
What Is Driving It?
One notable thing that has kept bitcoin transaction fees down has been the transactions that have been originating out of the largest cryptocurrency exchange in the world, Binance. Binance had sent out a large number of transactions, all carrying very low fees, which had flooded the mempool. This mempool which is a collection of unconfirmed transactions in something of a queue grew to a one-year high on May 11th off the back of these transactions.
BTC price trading at $29,300 | Source: BTCUSD on TradingView.com
Since the pool was already filled with low fees, users who wanted their transactions confirmed only had to include a slightly higher fee, which was still low, and they were prioritized by the miners. With time, a lot of these transactions had been confirmed even with the low fees and the pool is almost cleared.
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It is reported that the transactions originating out of the exchange were part of a wallet restricting process. Something that is carried out by exchanges from time to time. Additionally, the fact that fees had stayed low shows that increased volume does not always correlate to higher network usage.
Featured image from Forkast News, charts from Arcane Research and TradingView.com
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