Fees on Bitcoin (BTC) network have dropped more than 90% in a month, with industry insiders noting that they are low compared to what has historically been seen – but that they will now start gradually rising as a series of mining difficulty adjustments that aimed to balance out the China crackdown effects has ended.
Per BitInfoCharts.com, Bitcoin median transaction fee in USD (7-day moving average) is down 93% in a month, to USD 0.33 on August 4 from USD 4.46 seen on July 4.
Stephen Barbour, the owner of Upstream Data which makes portable Bitcoin mining skids, recently stated that mining revenue in BTC terms is at an “uncharacteristic low” when compared to previous bear markets 2014. It was “very unusual” and could be a “calm before a storm,” he said.
Cryptonews.com’s Chief Economist Philip Gradwell spoke to Cryptonews.com. He also said that the mining fee revenue in BTC and USD is lower than what we have seen historically.
He said that this is due to a decrease in overall on-chain use with bitcoin transactions on the blockchain returning to levels last seen during the fourth quarter 2019.
“Transaction fees were unusually low because network [mining] difficulty had to adjust in response to the drastic decrease in BTC havehrate that followed China’s crackdowns,” Igor Runets (CEO and Founder) of BitRiver, a major provider of colocation services in BTC mining,” he said.
China has embarked on a regulatory war against the crypto industry, impacting miners heavily, and forcing both big and small miners to close shop. However, long term, this is beneficial for the Bitcoin network, analysts claim, as the hashrate will be spreading more evenly across the world, establishing further decentralization. Per a recent research, China’s share of global bitcoin hashrate started declining before the latest government crackdown.
However, Runets told Cryptonews.com that he believes that the transaction fees will now start rising gradually, saying:
“The difficulty increased following the weekend’s latest difficulty adjustment. This ended a string of difficulty adjustments designed to compensate for the Chinese crackdowns on BTC hashrate.
Bitcoin mining difficulty, or the measure of how hard it is to compete for mining rewards, went up by 6% during the latest adjustment this past weekend, breaking the second-longest drop streak in the network’s history. This adjustment is the first since May, when China banned crypto mining.
Gradwell stated that he has always considered fees to be a lagging indicator for the overall market. He said that fees increase when people move BTC on blockchain. This is usually done when prices have already reached peak levels.
“However, the custody point is fair – it’s possible that more bitcoin, particularly with institutional investments in bitcoin over the past nine months, is sitting with third party custodians. It’s useful to compare bitcoin with Ethereum (ETH), where fees remain high, although down from their peak earlier in the year,” he said to Cryptonews.com.
Ethereum fees are now USD 3.5 as of August 4. This is up from USD 1.89 on July 25, and USD 1.47 June 29. However, it is still considerably lower than the USD 24.44 peak in mid-March.