Bitcoin transaction fees skyrocketed on August 22, with the average cost per transaction surging by a staggering 937.7%, rising from $0.74 to $7.679.
The significant shift from the comparatively stable fees observed since July was primarily driven by heightened network demand, resulting in a sharp increase.
Bitcoin transaction fees had consistently remained below the $2 threshold until mid-August, with the lowest value of $0.558 on August 18.
Lower Fees Led to Reduced Miner Revenues
Although low fees increased the accessibility of Bitcoin transactions to the general public, they also threatened miners’ revenues, as lower fees result in fewer earnings for miners who validate transactions on the network.
The abrupt fee increase on August 22 resulted from an overwhelming demand for network bandwidth, substantially increasing the cost of sending and receiving Bitcoin.
The surge significantly increased transaction costs for many crypto community members, which placed pressure on investors.
For instance, during the peak demand period, a user was required to pay 0.5 BTC in fees to consolidate a mere 0.55 BTC.
Nevertheless, this increase in fees was transient.
The average transaction fees had returned to $0.34 by August 23, according to data from the Bitcoin mempool.
In the interim, CryptoQuant, a data analytics firm, reported a substantial decrease in Bitcoin demand. The firm observed a decline in growth from 496,000 BTC in April to a negative growth of 25,000 BTC in August.
A reduction in purchases by U.S.-based spot Bitcoin ETFs has been partially responsible for the decline.
Bitcoin Miner Reserves Hit Two-Year High
Miners’ Bitcoin reserves have reached their most significant level in over two years, as previously reported, prompting apprehension regarding the potential price decline of Bitcoin.
According to historical patterns, a decline in the cryptocurrency market is frequently preceded by the accumulation of significant miner reserves.
To be more precise, the surge has increased miner reserves to a total of 368,000 Bitcoin, which is estimated to be worth $22.36 billion.
“In a recent report, CryptoQuant stated that historically, declines in Bitcoin prices have been correlated with increases in Bitcoin OTC desk balances.”.
Miners may be preparing to sell substantial quantities of Bitcoin, as evidenced by the 70% increase in their OTC balances over the past three months. This could result in downward pressure on the market.
The report compares previous instances in which significant price declines followed elevated miner reserves.
For instance, Bitcoin’s price was approximately $8,475 in May 2018, when miner OTC balances exceeded 400,000 BTC.
The price had decreased by 63% to $3,183 by December.
In November 2021, Bitcoin was trading at approximately $64,000, and miner reserves were at a near all-time peak of 500,000 BTC. A comparable pattern emerged.
Iran is currently implementing measures to combat illegal cryptocurrency mining, which a severe heatwave has further exacerbated the country’s electricity shortages.
Citizens who report illicit crypto-mining activities are eligible for financial incentives from the government, with rewards of up to 1 million toman (approximately $24) per tip.
