What is the impact on the BTC price of Bitcoin transaction fees, which hit an annual low?
Bitcoin transaction fees are often an indication that holders are moving coins. When the network is congested due to a large number of transactions, the transaction fees increase, which indicates a large amount of traffic on the network. Trading volume is typically high during a bull market when the price of a digital asset is rising, and the most common outcome is a sell-off when investors are trying to take profits.
But this bull market is nothing like usual. Much of what normally happens around the bull market was missing from the final race. A good example is the decline in reserves on stock exchanges.
A rise in the price of Bitcoin usually triggers an inflow of money into the exchanges as investors try to sell their coins, but this time it was the opposite. Foreign exchange reserves are falling and with it Bitcoin transaction fees are at an annual low, suggesting that investors are making fewer transactions on the network.
Transaction fees drop sharply
Bitcoin transaction fees hit lows not seen since last year. Fees, which skyrocketed after the massive exodus of miners from China, have now fallen back to pre-2021 levels. Competition for block space due to a drop in hash rate resulted in Bitcoin’s transaction fees increasing by around 50% on May 7, 2021. But when the miners resume their activity and the hashrate increases, the fees on the network decrease.
The current network activity shows that the demand for block space on the blockchain is quite low. This is the first time this has happened during a bull market as the demand for block space usually peaks during a bull run. Some of the recent bull markets show similar trends. Bitcoin’s transaction volume has skyrocketed in previous races, leading to higher demand for block space and higher transaction fees.
BTC transaction fees go down | Source: Arcane Research
Currently, the average transaction fee for Bitcoin transactions is $ 3, similar to last October. Compare that to April when the bull market was most explosive, the average transaction fee was $ 61.
Effects on Bitcoin Price
Like any other asset, the price of a digital asset is tied to the demand for that asset. Given the current transaction fees and volume, this shows that investors are not moving too much of their wealth. Hence, it turns out that investor sentiment is very stable and signals that the bull market will continue.
The HODL sentiment has always been important when it comes to the price of digital assets, and it seems that investors are now buying more BTC than they are selling. This leads to a shortage of the market, which is reflected in a decline in foreign exchange reserves – to an annual low. Scarcity leads to a higher value for the crypto king.
At press time, BTC price is trading in the mid-range of $ 47,000, up a modest 1% over the past 24 hours. The price tests the $ 48,000 resistance and successfully climbed to $ 48,450 before falling back to the current level of $ 47,593. The indicators continue to show a positive upward trend and the price should close in the green at the end of the day.
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According to Newsbtc