Since October 20th, the size of the mempool has maintained a clear correlation with the price. The fees on Bitcoin have been at their highest level in the last two months.

In recent days, congestion on Bitcoin (BTC) reached levels not seen in 20 days. The mempool shows a growing trend of unconfirmed transactions since October 20th, along with a price that reached USD 12,000 that day.

The following day, the mempool had a considerable increase, going from 14,486 MB to 45,484 MB. That same day, Paypal announced the incorporation of Bitcoin and other cryptocurrencies into its platform and boosted the price up to USD 13,161.

The mempool is the temporary memory that stores transactions pending confirmation. On October 21st, it reached a weight of 45.8 MB and over 70 thousand unconfirmed transactions.

The increase in the mempool may imply that a greater number of users are conducting transactions. The fear of missing out (FOMO) could be leading many new investors to enter Bitcoin by speculating that recent news could push its price higher.

It is important to note that the correlation between the mempool and the price of Bitcoin is not constant. In the period between February 19th and March 13th, when the price of Bitcoin lost 60%, the correlation between the size of the BTC mempool and the price of the cryptocurrency was negative by 41.2%. In 2016, that correlation was -83.1%.

Growth of Fees on Bitcoin

The correlation between the mempool and the fees that users pay for transactions in Bitcoin is what may be a usual constant. The network’s congestion encourages higher transaction fees to get priority and receive the validation of miners.

The average fee on October 22nd was USD 6.36, but it had been USD 1.46 just five days before. They are the largest values since August 6th, when the average fee was USD 6.47.

Many wallets, Bitcoin custodians, and exchanges do not support SegWit, which contributes to the increase in fees. The same occurs with those that offer high fees by default.

Checking the current trading volume on the network is one way to avoid paying high fees. Various online tools, including BitcoinFees.earn.com and mempool.space, allow users to do this.  Besides, it is necessary to use wallets with the flexibility to customize fees.

Another strategy is to implement the use of solutions in payment channels such as the Lightning Network, which is ideal for micro-payments.

Some months ago, Daniel Alós, a collaborator at HodlHodl, started an educational campaign on this tool. He explained that “the possibility that there will be another Bitcoin bullish rally and on-chain transaction fees will soar” had driven him to do it.

The congestion of the Bitcoin network due to PayPal’s announcement is just one of the signs of the reputation of the cryptocurrency among users. The cryptocurrency has shown an extraordinary ability to overcome its worst all-time lows.

By Willmen Blanco

LEAVE A REPLY

Please enter your comment!
Please enter your name here