Total BTC Fees for On-Chain Transactions Surged 50% in Last 24 Hours

The total fees paid for on-chain Bitcoin (BTC) transactions over the last 24 hours increased over 50% since yesterday.

On-chain data analytics service, Glassnode, pointed out several major developments shown by Bitcoin’s blockchain data. According to the firm, total Bitcoin fees paid over the last 24 hours increased by 50.7% to over $9,500. Furthermore, the Bitcoin mean fee paid by users increased by 58.8%, reaching $0.78.

Meni Rosenfeld, the Chairman of the Israeli Bitcoin Association, told Cointelegraph that he believes 24-hour fees show too short a timeframe to be particularly significant. He pointed out that historic data shows that the Bitcoin transaction fee rate is more volatile than the asset’s price itself. Still, he noted that if the trend continued it would acquire more significance:

“If the trend continues, a mild increase in fees can be a positive sign. It means people are actually willing to pay those fees — in other words, Bitcoin is increasing in popularity and usage. This can correlate with increases in the Bitcoin price and adoption. If the fees rise too much, though, it's not a healthy sign. It would mean that the technical infrastructure of Bitcoin is failing to scale, making it more difficult for people to benefit from Bitcoin, and stifling Bitcoin's potential to have a positive impact.“

Rosenfeld also pointed out that the size of Bitcoin fees is not the only metric that should be observed. He believes we should also pay attention to their variability. He explained:

“Rapidly changing fees make it harder to plan ahead and make the most out of Bitcoin. There are some technical proposals, such as ‘elastic block caps’ which I've been advocating, which seek to address this.”

Citing mempool statistics from German computer scientist Jochen Hoenicke, Oobit CEO Amram Adar noted that “there's a high correlation between a rise in network fees and an increase in Bitcoin price," adding:

“The last two periods in which the network suffered from high fees were between April and July 2019 where Bitcoin price rose from $4,200 to $13.800 and in December 2017.”

Bitcoin pending transaction fee. Source: Jochen Hoenicke

Furthermore, Adar said that after the halving-induced Bitcoin speculation craze cools off, he expects fees to return to their usual values. Still, he admits that if Bitcoin sees another bull run, then the higher-than-usual fees could last longer. Lastly, he noted that high fees may not be all that positive for Bitcoin in the short term:

“In the short-term, the rise in network fees could cause a problem for consumers, mainly since it’ll be hard to perceive them as justified. It could, perhaps, lead them to shift to other cryptocurrencies, with lower fees and higher transaction speeds, once the media hype over the halving event stabilizes. ”

Diego Gutierrez Zaldivar, the CEO of blockchain firm IOV Labs, had a more positive view on rising Bitcoin fees. He explained that high fees generally indicate a high volume of transactions, which he finds unsurprising, given the interest in Bitcoin spurred by the ongoing pandemic and the government’s inflationary measures:

“Bitcoin’s scalability issues, which includes the problem of keeping transaction fees low, are well known. However, Bitcoin remains resilient as a neutral store of value, which is why Bitcoin-based sidechains and offchain payments solutions continue to build out a financial system from its foundational layer.”

Rosenfeld also explained that in the long term, on-chain transaction fees are expected to rise. Still, he pointed out that the cost of spending Bitcoin may not rise, thanks to the adoption of second-layer solutions like the Lightning Network:

“In the long term, the fee for an on-chain transaction should rise, but that doesn't mean that fee for a Bitcoin payment has to rise. As Bitcoin grows, we will see more reliance on 2nd layer solutions such as the Lightning Network. The fee for each payment on the 2nd layer can be very cheap - but the on-chain transaction which opens a channel will be more valuable, thus more expensive.”

According to Rosenfeld, “there is a delicate balance with regards to the optimal fee level.” He said that if fees are too low, miners become underfunded. If they are too high, the usefulness of Bitcoin decreases. He concluded:

“Fees are generally low now so an increase can be a positive sign, but if they go too high, we will need to seriously consider new scaling solutions.”

Many traders have become increasingly bullish on Bitcoin as the block reward halving approaches. As Cointelegraph reported earlier today, Bitcoin hodlers are presently accumulating $530 million of the coin each day.

Yesterday, a Bloomberg report stated that Bitcoin is preparing for a bull run reminiscent of the one that the cryptocurrency saw in 2017.