Bitcoin transaction costs have dropped to levels not seen in a decade, and here’s why

The cost of transferring Bitcoin across the network has fallen to decade lows as a result of the Lightning Network, batching, miner behaviour, and protocol enhancements.

This is an excellent opportunity to transfer Bitcoin (BTC) between wallets and exchangers. According to Galaxy Digital’s study, Bitcoin transaction costs have reached an all-time low in BTC.

According to the research, the Bitcoin mean transaction fee has decreased to 0.00004541 Bitcoin ($2.06) in 2022, while the median is 0.00001292 Bitcoin ($0.59), the lowest level since 2011.

According to Alex Thorn, head of firmwide research at Galaxy Digital, the decline in fees is the result of a combination of increased Segwit adoption, batching transactions, growth in the Lightning Network, a collapse in miners selling, and “lower OP Return usage.”

James Check, Glassnode’s lead on-chain analyst, concurred with Thorn, that “batching and Segwit are undoubtedly part of the mix,” as the combination will increase the amount of transactions that fit in a block, hence increasing throughput and reducing fee pressure.

He submitted the following graph to demonstrate that Segwit adoption “substantially increased” during the May-July lows.

Check continues, “However, this is not the entire storey…”:

 

“The primary reason I feel fees are low is that we experienced a 50% price fall in May, which completely devastated retail interest.”

He asserts that “all three metrics” (fees, active addresses, and transaction counts) “collapsed following the May sell-off.”

“In my opinion, this was the beginning of a bear market, and even with the price run-up, we saw a large number of people financially burned and thus forced out of the market.”

“We’re experiencing a structural change in market dynamics,” Eric Yakes, author of The 7th Property: Bitcoin and the Monetary Revolution.

In terms of the network’s future, the “$70 million raised by lighting labs to create a stablecoin and asset system” is a significant milestone for the Bitcoin protocol. He continued, “It is critical that transaction costs continue to decline, as they are the fundamental impediment to scaling a network decentralised.”

While transaction fees benefit wallet administrators and enable the establishment of lightning channels, they may indicate that retail interest has waned. According to Check, “go no farther than ye olde Google trends to understand just how popular the orange coin is right now,” implying that “new users are coming in at a near-zero rate.”

Yakes has the final word on Bitcoin’s emergence:

“Bitcoin requires the lightning network to maintain its current growth rate and for the emergence of a vibrant network of smart contract development.”

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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