Data shows the Bitcoin transaction fees has now fallen down to levels not seen since April 2020, which was right after when the pandemic began.
Bitcoin Transaction Fees Has Plummeted To Lows Not Observed Since More Than Two Years Ago
According to the latest weekly report from Arcane Research, the BTC transaction fees has taken a 28% hit during the past week.
The “transaction fees” here refers to the small amount that anyone making transfers on the Bitcoin blockchain has to attach with the transaction in order for miners to pick it up.
In periods of network congestion, some transactions can get stuck for a while before the miners get to them as miners can only hash a limited number of transactions at any given time.
Users who are in a hurry and want to get their transactions through as soon as possible put a higher than average fee on their transfers so that the miners prioritize them.
Others may also try to compete against these users and attach even higher fees. In this way, the network average can quickly blow up during busy times.
However, if there is limited activity on the network, users have no incentive to go for higher fees. Because of this, during low traffic periods the mean fees can end up being quite low.
Now, here is a table that shows how the Bitcoin transaction fees and other miner-related metrics changed in value during the last seven days:
Looks like the daily miner revenues saw a 5% decline during this period | Source: Arcane Research's The Weekly Update - Week 33, 2022
As you can see above, the Bitcoin transaction fees per day fell from $369k a week ago, to just $265k now. This means the metric observed a whopping 28% plummet in only one week.
The current level of the transaction fees is the same as during the bottom more than two years ago, back in the April of 2020.
The report notes that this trend suggests the on-chain activity of the cryptocurrency is very muted at the moment.
There are two main reasons behind the latest plummet in the fees. First, the daily transaction volume observed a 10% drawdown during the week, taking it to a historically low level.
And second, the block production rate has been elevated above the constant value that the network normally aims for. This has lead to the miners being able to hash more transactions than usual, while demand has been low.
The report explains that the simple supply-demand dynamics are at play here, which have lead to the plunge in fees.
At the time of writing, Bitcoin’s price floats around $21.7k, down 7% in the past week.
BTC has been moving sideways in the last few days | Source: BTCUSD on TradingView
Featured image from Michael Förtsch on Unsplash.com, charts from TradingView.com, Arcane Research