15 May 2022
Bitcoin’s on-chain activity surges – but fees stay lowLast week saw an explosion in demand to make Bitcoin on-chain transactions, but we only saw a minuscule increase in the mean transaction fee. Why?
During the past seven days, users have transferred a daily average of 830,000 BTC over the Bitcoin network – the highest since 2011.The surging number of bitcoin transferred per day indicates a high demand for making on-chain transactions, which, all else equal, should lead to increased transaction fees. Still, the daily mean transaction fee has stayed remarkably low over the past seven days, only seeing a slight increase to just above $2.The mempool, the collection of unconfirmed transactions waiting to be picked up by miners and included in a block, grew to its biggest size in one year on May 11th.The explosive mempool growth was caused by Binance pushing out a massive number of transactions simultaneously, all with similar, low transaction fees. These transactions were likely part of a wallet restructuring process, which exchanges do now and then.Since Binance priced all the transactions with low fees, there was no upwards pressure on fees, as other users who priced their transactions slightly higher had their transactions prioritized by the miners. The mempool is still filled with some of these transactions but is in the process of being cleared.These findings mean that the massive on-chain volume can't be solely attributed to increased Bitcoin usage, as it was primarily caused by Binance restructuring its wallets.