Bitcoin transaction fees have hit a 10-year low; what is the reason?

According to the latest available statistics, bitcoin transaction fees have reached their lowest level since 2011. This is certainly in the interest of many bitcoin network users and may also be a sign that small start-up investors are leaving the market. .

According to the Coin Telegraph, now is a great time to transfer bitcoins between a stock exchange account and private wallets. According to the latest study by the Galaxy Digital Institute, fees for bitcoin transactions have reached their lowest level in a decade.

As shown in the chart below, the average bitcoin transaction fee has dropped to 0.000004541 ($ 2.06) in 2022, while the average fee is now around 0.00001292 bitcoin ($ 0.59), which is the lowest level in the last 10 years.

It should be noted that the average is the total amount of fees paid per transaction, and the average line between the upper and lower half of the fees is determined based on their value.

Average transaction fee compared to the price of bitcoin
Graph of the average transaction fee compared to the price of bitcoin.

According to Alex Thorne, chief research officer of Galaxy Digital, a combination of growing adoption of Segwit software, transaction packing, a growing Lightning network, reduced miner sales and reduced use of the “OP_Return” code. Burning bitcoins has reduced transaction fees over the past decade.

James Chek, chief glass data analyst at Glassnode, said he agreed with Thorne, adding that “packaging and segway are certainly part of the reason for the fee cuts” as they combine the number of transactions in a block. They increase and as a result, as network bandwidth increases, the charge decreases.

He shared the chart below to show that the adoption of the Segway update “has increased significantly from its lowest level between May and July (May and July)”.

Read also: Problem with bitcoin fee and transaction verification; Everything you need to know

Seagate soft fork acceptance table
Seagate soft fork acceptance table.

The inspection also said:

That’s not the whole story. My first reason for the low wages is that in May we had a 50% drop in prices; What has happened is that small investors have left the market.

“The charts of fees (orange line), the number of active addresses (blue line) and the number of transactions (purple line) have decreased after the price fell (gray line) in May,” he said.

Comparison of fees with network activities
Graph comparing bitcoin fees and prices with network activities.

Added check:

In my opinion, this (reduction in wages) stems from the decline of the market, and even with rising prices we have seen the financial loss of many people and, as a result, their exit from the market.

Eric Yakes, author of The Seventh Asset: Bitcoin and the Monetary Revolution, told the Telegraph in a recent interview that “we are now witnessing a structural change in market trends and other historical correlations have become less important.”

Yax believes that raising $ 70 million from Lightning Labs to build a special protocol for offering and transferring stable coins and other digital currencies on the Lightning network is a key development for Bitcoin.

Read also: The first transfer of tether was made in the Lightning network; A historical beginning for bitcoin

He added:

Reducing transaction fees is very important, as it is a major constraint on the scalability of the network while maintaining its decentralized structure.

Although the reduction of transaction fees and the opening of channels in the Lightning network is good for consumers, this may be a sign that micro-investors are losing interest in this area. “Looking at Google’s user search data, we can see how popular bitcoin is right now,” said James Check. “Right now, we can say that the percentage of new users looking for bitcoin is close to zero,” he said.

Graph of consumer searches for bitcoin in the United States
Graph of changes in the number of US users searching for the keyword “Bitcoin”.

At the end of his speech, Yax said:

Bitcoin needs Lightning to keep pace with its growth and become a thriving network for smart contract development.

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