Bitcoin fees are skyrocketing.
This is a surge of 1,256% in the past month.
The last time the fees were this high was in February 2018, when the price of bitcoin was coming down from its 2017 bull rally and trading between $8,000 and $10,000.
In June 2019 and 2018 as well, the fees record a spike to $6.8.
The all-time high put in by Bitcoin fees was in December 2017 at just over $55, just a few days after the BTC price made a new ATH.
This surge in bitcoin fees is the result of a drop in hash rate that increased the average interval between bitcoin blocks to its highest levels since late 2018. As a result, on May 17, only 95 blocks were mined and in bitcoin's history we only had 8 days with less than 100 blocks.
Halving sentiments continue to affect the market, as decline hash rate has less number of blocks being mined. Bitcoin miners are also selling much less in the market, the first week after the halving 6.5k BTC were sold compared to the average 12.3k per week twelve weeks before the event.
The decrease in the total number of blocks also led to an increase in the size of each individual block. On May 17th, the mean block size reached a new all-time high of 1.32 MB.
Now that fewer blocks are being produced, there is more competition for block space as such causing this increase in transaction fees. Paying a higher fee leads to a higher chance of miners including the transaction in a block.
“Median fees tend to surge during periods where block space is at a premium,” noted Coin Metrics.
Just like Bitcoin, Ethereum’s transaction fees continue to climb. Its median transaction fee has been surging throughout May, currently above $0.5, as per Bitinfocharts.
While both Bitcoin (BTC) and Ethereum (ETH) transaction fees are showing signs of growth since Bitcoin halving, Bitcoin Cash (BCH), Bitcoin SV (BSV), Ripple (XRP), and Litecoin (LTC) median fees haven’t shown any significant increases.
Although yesterday there was a downward difficulty adjustment of 6%, it is expected to take two more weeks for the bitcoin mining market to find the new equilibrium. Once the blocks start getting mined every 10 minutes, the backlog should clear, and the fees back to normal as have happened in the past.