The imminent approval of a spot Bitcoin ETF in the US has surged demand for the cryptocurrency, resulting in a notable spike in transaction fees.
On November 16, CryptoFees data recorded $11.6 million in fees on the Bitcoin blockchain. Currently, YCharts reports an average fee of $18.69, marking a 113% increase from the previous day and an astonishing 746% surge from a year earlier.
Bitcoin has reached 18-month highs, surpassing its bear market range and currently trading at $37,130. This upward trend initiated with BlackRock’s spot BTC ETF application to the SEC in June, followed by submissions from major US asset managers like Fidelity, ARK Invest, and WisdomTree.
A spot Bitcoin ETF directly tracks Bitcoin’s price by purchasing Bitcoin as its underlying asset. This allows investors to engage in Bitcoin’s market using standard brokerage accounts, offering exposure to BTC price fluctuations without the need to purchase it on a crypto exchange.
Expected to attract institutional investments, a spot Bitcoin ETF could propel Bitcoin’s price to unprecedented levels in the coming months. Bloomberg analysts estimate a 90% likelihood of approval for all proposals within the same batch by January.
Additionally, market analysts link the surge in BTC’s transaction fees to the resurgence of Ordinal Inscriptions. These digital assets, akin to NFTs but based on BTC’s smallest unit (satoshis), gained attention earlier this year, marking Bitcoin’s entry into the NFT realm.
Though initial interest waned with market shifts, a renewed interest emerged as these assets expanded to other blockchains such as Polygon and Litecoin.
Despite concerns about escalated transaction fees dissuading BTC users, on-chain data suggests a contrary trend.
According to IntoTheBlock, Bitcoin adoption reached a new yearly peak at 67.62% this week. This surge reflects an increase in newly established active addresses, signifying an influx of new participants in the market. Moreover, the quantity of BTC held by long-term investors hit a record high, with over 1 million addresses possessing more than 1 unit of Bitcoin.
Blockchain analytics firm Santiment further supports these observations, noting an increase in smaller wallets holding less than 1 BTC.
“Bitcoin’s wallets have fluctuated during this major market-wide surge. Tons of new smaller wallets with less than 1 BTC have flooded the network. Meanwhile, the 1-100 tier has flattened out, and the 100+ tier may be in the midst of some profit-taking,” stated Santiment.
While soaring transaction fees present challenges for Bitcoin users, certain market analysts view them as a positive advancement, asserting that higher fees contribute to reinforcing the security of the Bitcoin blockchain.
Furthermore, the notably expensive transactional engagements benefit struggling miners responsible for maintaining and securing the Bitcoin network. They receive BTC fees as rewards for processing users’ transactions.
This holds particular significance for miners as Bitcoin’s upcoming quadrennial halving event, slated for April 2024, approaches. This event will halve block rewards for miners in the industry.
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