High fees typically indicate that demand for processing transactions is significantly higher than the supply of miners – suggesting more people are using the network and willing to pay more for speedy settlements.
The average transaction cost for Bitcoin soared 414% in the days before the halving, peaking at $3.19 on May 8, from as low as $0.62 on April 26.
This is the highest price bitcoiners have paid for a transaction on the network in ten months, according to data from Bitinfocharts.
Fees are paid each time a Bitcoin transaction is processed and confirmed by a miner, who pockets the fees, in addition to the block reward, as revenue.
Transaction costs hovered around $1.80 in early May before spiking to $3.19 three days ago. For the greater part of April, fees averaged well below $1, but rose sharply as the month drew to a close, reaching $2.86 on April 30. Overall, fees grew seven-fold in the month.
At the time of writing, the cost of a transaction on the Bitcoin network had dropped slightly below $2, as per the Bitinfocharts data.
In July 2019, fees soared to $6.18, but remained significantly below the $55 reported in December 2017, when the price of BTC hit a record high $20,000.
Halving events have historically been associated with sharp increases in transaction fees. The upcoming halving – only a few hours away – will reduce the supply of bitcoin, cutting the rewards paid to miners 50% to 6.25BTC.
While traders are excited about the prospect of rising BTC prices, there is some concern that the halving will result in a sharp revenue decline for miners. Analysts say miners might seek to compensate revenue losses through higher transaction fees.
60% of Coinbase’s Customers Buy Bitcoin First Before Moving into Altcoins
Bitcoin provides a gateway to the altcoin market for a majority of investors who buy Bitcoin as their first digital asset, Coinbase has revealed in a new research report.
Bitcoin is the most popular digital asset among first-time investors on Coinbase
Investors who purchase their first digital asset on Coinbase buy Bitcoin, but a majority then move on to purchase other cryptocurrencies, a report by the US-based crypto exchange shows
According to the report, about 60% of people buy Bitcoin as their first cryptocurrency. However, only 24% of these maintain their holdings entirely in the leading cryptocurrency. Most choose to venture into the altcoin market for other investment options
A majority of customers buy Bitcoin before using its “feel good” effect to venture into altcoins according
The report showed that most investors look to benefit from major price upswings, especially when altcoins have hit a bull run alongside Bitcoin. For instance, during the 2017 bull market, investors rushed to other leading crypto, with the ICO boom driving more volume to Ethereum.
The bull market saw most investors on Coinbase buy and trade Ethereum and Litecoin, with trading volumes reaching 70% to push Bitcoin’s dominance index on Coinbase below 30%.
The report also reveals that altcoins also spiked in December 2019 through to the early months of 2020, driving investors to Ethereum, Tezos, BAT, and Stellar.
Justin Mart notes that the behaviour (investors first buying Bitcoin and then venturing off to altcoins) could be due to a variety of reasons. It includes Coinbase’s increased listing of new currencies. However, he notes that the underlying reason could be a psychological:
“As people feel good about their initial crypto investments (into Bitcoin), they branch out to find other possible categorical winners…”
According to the blog report, Bitcoin’s dominance on Coinbase has consistently swung above 50% since dropping below 30% during the 2017 bull market. However, retail volumes show the penchant for alternative assets remains strong.
“Bitcoin is king, and likely to remain king for a long time. But it is also paving the way for a thousand flowers to bloom”, Mart adds.
The report appears to corroborate earlier takes on the topic, with other analysts suggesting that Bitcoin is being used like a ‘gateway drug’ that investors use to get into alternative digital currencies.