Fees are so expensive now!
In a record-breaking fashion that we have been seeing over the past few months with many of bitcoin’s metrics, this week, bitcoin’s fees (relative in USD) also broke all-time highs with mean transaction fees reaching over $60 per transaction. So if you had a transaction to transfer $40 worth of bitcoins, you would be needing to pay over $60 in fees just to transfer $40. It does sound ludicrous in many ways and ridiculous. But actually, there are different ways to look at this.
If you just look at it in the measurement of Satoshis or sats, which is the smallest denomination of a bitcoin, specifically it is one hundred millionth of a bitcoin, we are actually nowhere near all-time highs. Current readings this week showed transaction fees costing over 100,000 sats but back in 2017 during the second bull run, mean transaction fees were way past 300,000 sats. So in the true spirit of being a bitcoiner, one shall not complain yet because fees are actually relatively still quite low compared to 2017. But of course, in dollars, it’s quite a hefty burden.
On one hand, all this burden is pronouncing the narrative of bitcoin being a store of value rather than a daily currency. But on the other hand, one could also say this is pronouncing the necessity of the lightning network. This network is a layer 2 network built on top of the bitcoin network enabling users to open channels with one another for faster and cheaper transactions. At the moment, there is over $60m in TVL within lightning nodes and channels. Low for now but as we see transaction fees sustain their highness, the lightning network could be the solution for further adoption of the Bitcoin Network.
But there are definitely those miners who are enjoying the hefty fees as profits. Just this past week, the percent of miner revenue stemming from transaction fees was close to 30%. The last time we saw it this high was at the end of October in 2020. But in another surprising stat, the total amount in fees miners took in one single day is still the highest in 2017. About $16.7 million was earned on April 20 whereas $20.7 million on Dec. 22, 207 was earned. Either way, miners are sitting happily right now but the battle is getting more fierce. And recently this week, hashrates suddenly took a huge drop down to lower than 100 EH/s which is rightfully one of the major factors of the mempool congestion and higher transaction fees.
In another interesting data point to display, is the fact that the percent of UTXOs in profit at the moment have dipped under the support line of 95% for the first time since October. Does this mean that the bull run is over? Well, let’s not get ahead of ourselves here. This data point essentially shows how many UTXOs, or bitcoins, are in unrealized profit territory. Meaning that if they sold at current prices, they would be in profit.
But recently, that ratio just dropped below 95%. The range between 95% and 100% is considered the golden spot especially during bull runs. And during the last bull run, this ratio dipped below the 95% range 5 different times. So if this time we have seen it go below 95% once already, expect the bull run to last longer hopefully.
About Valarhash
Chengdu-based Valarhash integrates mining machine sales, miner hosting, mining pool, and mine construction services. Led by CEO Fiona Lv, Valarhash aims to provide users with transparent and beneficial mining plans using advanced technology, with lower barriers of entry. Business operations cover hardware research and development, digital asset transactions and 1TMine hash power contract sharing. With a leading position in the hash power market, Valarhash integrates frontier resources with global vision, providing crypto compute service (CCS) and linking physical and digital worlds with blockchain technology.
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