Daily Transactions on the Bitcoin Blockchain Cools
Bitcoin daily trading averages dropped to about $34.8 billion. This is a sharp decline from the record $67 billion in May and the lowest since last December according to research by CoinDesk. Compared to the April high points, we can see with certainty that the hype has left the cryptocurrency markets. Also, the hash rate of the Bitcoin blockchain has dropped significantly.
Response to Chinese miners crackdown
This is predominantly in response to pressures caused as a result of the decision of China to stop all Bitcoin mining activities. Authorities in Xinjiang directed power plants in the Zhundong Economic-Technological Development Zone to shut down their mining facilities. These areas have historically been major Bitcoin mining hubs in China because they had abundant fossil fuel and hydroelectric energy.
Major Chinese Bitcoin mining pools were hit by the directive. Miners prefer areas with low electricity costs because it makes their mining activities more profitable. The cost of electricity accounts for a major part of the costs of mining activities.
In this graph, we will see that the average number of transactions daily on the Bitcoin blockchain has dropped to levels that have not been seen since the darkest days of crypto winter.
There are some positives. For instance, at the peak of the recent cycle, the average transaction fee for sending Bitcoin reached $62. Right now, it has come back to a manageable level around $8.
People who use the main chain fairly frequently will be very grateful for the discounts. Although it means that the value of their stock has been slashed, no one loves paying high fees. Hopefully, the Taproot upgrade will help to reduce prices by the time we get to the next peak.
As the hype bubble has popped we are beginning to see a most welcome period of relaxation this traditionally has been good for developers and builders of the network to get to work on growing the industry. For instance, in 2015 and 2018, a similar scenario played out. The drop in price at that time chased out the skeptics who had no conviction about crypto and the developers were able to build the network.
The Ethereum network
The Italian network is a bit different though. The average number of transactions but they are also falling but the levels is not as bad as some other parts of the year.
In terms of gas fees, the Ethereum blockchain has completely cooled down. Gas fees in May were about $45 per transaction, right now it’s about $4. As some would say, down, down but not out.
Although some people in the developing economies may see four dollars as a high fee to pay it will certainly allow most people to participate in various decentralized finance solutions without having to worry about gas fees.
How to attract institutions into DeFi projects
To yield interest on their crypto, the majority are using services like Celsius, BlockFi, and Nexo. There’s nothing wrong with this especially for retail customers that can benefit from a user-friendly interface and have peace of mind without having to deal with smart contracts. However, for the institutions that manage people’s phones to the tune of millions of billions of dollars is difficult to migrate such funds into DeFi.
First of all, there need to be audits so that a skilled blockchain auditor can understand the security of funds and the levels of risk. They also need to know how the yield is derived. Also, we need to see more projects involved in defy insurance. Insurance is a critical aspect to be put in place before the fire can begin to attract the type of phones that will be really meaningful to the tune of billions or trillions of dollars. When this is done investors from the bond markets and commodity markets and other markets would be encouraged to migrate their funds into DeFi.
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