Coinspeaker Bitcoin Transaction Fees Plummet to Four-Year Low since COVID-19 Pandemic
Bitcoin transaction fees have plummeted to their lowest level in four years. As of July 7, the average fee per Bitcoin transaction dropped to $38.69, a figure last seen during the height of the COVID-19 pandemic in 2020.
The COVID-19 pandemic dramatically increased the popularity of Bitcoin as investors sought alternative assets amidst global economic uncertainty. This surge in demand led to a significant increase in Bitcoin transactions, which, in turn, drove up transaction fees.
During this period, users faced higher costs to ensure their transactions were processed without delay. However, this trend has changed recently, with transaction costs dropping to $38.69.
Factors Influencing Transaction Fees
The cost of transaction fees on the Bitcoin network is primarily determined by two major factors: miners’ revenue and the total number of transactions processed. According to data from Ycharts on July 7, Bitcoin miners processed a total of 673,752 transactions on the Bitcoin network, with 89.7% of the transactions involving Bitcoin (BTC). This high volume helped reduce transaction costs on the Bitcoin network.
The remaining bandwidth was utilized by other blockchain protocols within the Bitcoin ecosystem, including Ordinals (0.7%), BRC-20 (4.1%), and Runes (5.4%).
Regarding mining rewards, Bitcoin miners received 1.14% of the total transaction volume recorded on July 7, which represents an average share since the beginning of the year in January.
Despite the lower average transaction costs, which usually means reduced revenue, miners were not completely at a loss as they benefited from the lower network difficulty. This allowed them to process transactions with less computational effort.
Implications for Traders and Miners
While reduced transaction costs benefit Bitcoin traders by allowing them to pay lower fees to process transactions, miners may face challenges in weathering the current market storm.
According to a recent report from market intelligence firm CryptoQuant, Bitcoin miners may soon face “capitulation” as profit margins tighten with Bitcoin (BTC) falling back to the $50,000-$55,000 range.
This situation means that companies involved in Bitcoin mining may choose to sell their earnings or reduce operational costs to maintain their operations during uncertain market conditions.
Analysts at CryptoQuant pointed out several signs of capitulation that have emerged over the past month, including a significant decline in Bitcoin’s hashrate.
“Bitcoin Miner capitulation mirrors December 2022 levels with a 7.7% hashrate drop, similar to post-FTX collapse conditions. Such declines often signal potential market bottoms,” experts wrote.
Additionally, CryptoQuant disclosed that miners have been “extremely underpaid”, which may also contribute to the potential capitulation.
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Bitcoin Transaction Fees Plummet to Four-Year Low since COVID-19 Pandemic