- Bitcoin fees rising in tandem with Bitcoin price but situation “nowhere” near December 2017
- Sergej Kotliar, Bitrefill CEO says if BitMEX optimizes its withdrawal transaction dump, transactions would shrink over 98%
2019 is turning out to be a good month for the leading cryptocurrency. The rally started in April where the price went $4,000 to $5,500 and then last month, the Bitcoin price increased from $5,300 to about $9,100. However, this surge in BTC price saw a corresponding increase in the fees.
As can be seen in the chart below, a noticeable spike in fees can be seen in April which increased considerably in May. On May 30th, the average fees on the bitcoin network climbed to $5.7 that was last seen in June 2018. However, yesterday we dropped down to $3.4 level.
What’s interesting is the lowest fees paid on the Bitcoin network to send transaction had reached as low as $0.1 in February 2019. However, the surge is nothing new as, during the 2017 bull run top, the fees skyrocketed to $54.9.
Regarding this situation, Sergej Kotliar, the CEO of Bitrefill took to Twitter to share that isn’t the end of the world yet. He further states how the mempool not clearing out the transactions overnight situation is “nowhere” near what we had in December 2017.
Given the fact that the spike in fees happens around bitcoin price increase, this means it is connected to the traffic between exchanges.
As for how the situation is different from 2007? Kotliar says people are now aware of fees while most exchanges batch and we also have Liquid, Lightning, and altcoins on most exchanges.
He further says, 2017 won’t return anytime soon and once exchanges turn to these options, these spikes will rather disappear.
Kotliar specifically pointed out two cryptocurrency exchanges that play a huge role here viz. Coinbase and BitMEX. To start with Coinbase, they don’t batch their sending transactions that take up a significant portion of mempool space. Kotliar mentions how in January 2018, Coinbase said in a now-deleted tweet that they were actively working on batching.
The second exchange is BitMEX which he says dumps about 4 MB of withdrawal transactions every day at 9:15 am ET. This is a big reason for the high fees during US office hours and optimizing these, Kotliar says would make transactions shrink more than 98 percent.
While Coinbase has been labeled as a detriment to the Bitcoin fee economy, BitMEX replied that SegWit is currently being tested but it is bundled with other updates.
We have SegWit in testing but it is bundled with some other backend upgrades to systems that will allow us to monitor many more addresses and rotate them more freely.
— BitMEX (@BitMEXdotcom) June 2, 2019
The exchange also says, there can only be one batch release because they still manually receive withdrawals and process them by hand. Doing it multiple times a day is infeasible, the exchange said adding
“artificially delaying the release of withdrawals would hamper the user experience.”