The fourth halving of Bitcoin has come and gone, and its impact is already evident with a more than 3% increase in price since then – a harbinger of future growth in comparison to previous halvings.
Halfings have historically elicited a range of short-term responses, but they often point in the direction of a bullish trend over the long term. It is important to remember, nevertheless, that there aren’t many historical occurrences to draw strong conclusions from.
In addition to market swings, transaction costs experienced a notable increase the weekend after the halving, rather than a price increase. The average network costs for Bitcoin surged to a record $146, dwarfing Ethereum’s small $3 charge. The indications were there, but the community was unprepared for this rise.
Reason behind fees
Behind the scenes, the current activity around Bitcoin’s block space is largely responsible for this fee increase. Similar to the Ordinals protocol, the Runes protocol increased demand for blockchain space upon its launch. The Runes protocol is a framework designed to make token issuance on Bitcoin easier.
Similar to constructing NFTs, both systems include scribing data onto Bitcoin blocks, increasing demand for block space and, consequently, transaction fees.
Furthermore, the debut of Runes probably helped to spur even more demand, which resulted in noticeable swings in fee levels throughout the weekend. The competition for block space results in increased expenses when it comes to carrying out network transactions.
Bitcoin’s permanent swap financing rates remained mostly unchanged despite these fee adjustments, indicating that market sentiment has not shifted much in favour of or against the price direction. Open interest is still around $10 billion even if it has decreased since its peak in March.
