The Bitcoin network was recently clogged with a backlog of over 560,000 unconfirmed transactions. Memory usage topped the 300MB mark, reaching a staggering 1GB. Even transaction fees skyrocketed, reaching over 20 sat/vB at one point. What is the story behind this sudden congestion? Let’s break it down.
The culprit appears to be a phenomenon known as “FOMO,” or fear of missing out on something, caused by sats minting. This minting frenzy caused a spike in transactions, causing the pink to slow down as it worked out the backlog. But before you hit the panic button, let’s put things in perspective.
First, it is essential to understand that the Bitcoin network is designed to handle fluctuations in transaction volume. While the current delay is unusual, it is not catastrophic. Purple’s underlying architecture is robust enough to handle the situation, and it’s only a matter of time before the lag is removed.
Second, high transaction fees are a temporary phenomenon. As purple gets over the backlog, the rates will normalize. So if you’re not in a rush to confirm your transaction, you may want to wait.
Now, let’s talk numbers. How has this event impacted the performance of the Bitcoin market? Interestingly, the price of Bitcoin has remained relatively stable. At the time of writing, Bitcoin is trading at around $25,700 and there has been almost no movement in the past few hours. The market seems to have absorbed the news without much drama, indicating that investors are not overly concerned about the health of the network.
While the actual delay in transactions and increased fees may have drawn attention, it is not a red flag that the Bitcoin network is collapsing. The system is resilient and equipped to deal with these setbacks.
The Slowdown in the Economy
The surprise economic contraction experienced in the second quarter reflects the tightening of financial conditions in Canada as a result of the historically rapid acceleration of the benchmark interest rate. The second quarter revealed a slowdown in growth that, annualized as a percentage, represents an annual drop of 0.2%. However, the Bank of Canada (BoC) has warned that rates may need to be raised should inflationary pressures resurface. Headline inflation increased from 2.8% to 3.3% in August and the rise in oil prices presents new complications for the inflation outlook.
USD/CAD remains within the existing uptrend, but signs of potential fatigue have appeared at current levels. The extended upper candle revolving around the important 61.8% Fibonacci retracement (1.3650) suggests a rejection of higher prices. The RSI also reveals that the current uptrend risks overheating by entering overbought territory.
1.3855 is the long-term resistance level should the bulls outweigh the bears above 1.3650, but those in favor of the pair turning lower from here will keep an eye on the 1.3503 level and the average simple mobile of 200 points. US CPI next week will play a huge role in determining the pair’s short-term direction. The pair may get a breather if inflationary pressures in the US ease.
By Audy Castañeda