This May, the utility of Bitcoin, the first and most precious cryptocurrency in the world, has significantly decreased. Less than 800,000 distinct Bitcoin addresses are transacting on the network per day for the first time since July 2021. This decline in network activity coincides with a general market correction that is having an impact on the values of Bitcoin and other digital assets.
It’s interesting to note that the price of Bitcoin has not decreased proportionally to this decline in daily transactions. Bitcoin’s value is still rather high despite the recent decline, showing some price resilience in the face of altering market forces.
The change in mining economics adds another element to the present Bitcoin story. It has only happened four times previously, but now the average transaction cost per block has topped the block reward in a historic occurrence.
Historically, these spikes in high transaction fee pressure have been transitory and have subsided within a few days. This scenario implies that the current pressure could only last for a short while, despite the potential for significant short-term market effects.
The average mined block was carrying 6.66 BTC in transaction fees during the height of the most recent BRC-20 craze. This led to a total block reward of about 12.9 BTC, or about $348,000, which is a sizable amount and reflects the frenzied activity on the Bitcoin network.
We still don’t completely understand the ramifications for investors, miners, and the larger crypto ecosystem when these changes in Bitcoin’s network activity and transaction economics take place. One thing is certain, though: Bitcoin’s price stability demonstrates its strength even during market corrections, regardless of fluctuations in daily transactions.
