While transaction fees rise to an annual high, the hash rate is plummeting. The market update.
The Bitcoin exchange rate (BTC) has leveled off again at the previous day’s level with a 24-hour fluctuation range of around 600 US dollars. After the wild ascent of the last few days, the Bitcoin price is taking a breather, but is vehemently defending the 13,000 mark. At the time of going to press, the largest cryptocurrency by market capitalization is trading at $ 13,193, which is an increase of 1.8 percent on a weekly basis. As a result of the latest rally, the crypto reserve currency has risen by 21.6 percent in value in a 30-day comparison.
With the recent rally, transaction fees on the Bitcoin network have skyrocketed again. With an average of 0.00093937 BTC (the equivalent of just under 12.44 US dollars), the costs per transaction are higher than they have been since June 2018. In the last 13 days, in which the Bitcoin exchange rate has risen by around 2,000 US dollars, the transaction fees have increased by a remarkable 628 percent.
An increase in transaction fees can usually be explained by greater demand in the network. When there is a high flow of transactions, miners are in the favorable position of preferring transactions with the highest fees. As a result, there is a transaction jam, the average confirmation times increase and the mempool, the waiting room for all outstanding transactions, inflates.
Here, too, there has been a rapid increase in outstanding transactions in the last four days. While the number of transactions waiting for confirmation in the mempool was still a manageable 3,164 on October 26, they have increased many times over to 107,986 in a very short time.
The increase in transaction fees with the simultaneous expansion of the mempool was also triggered by a decrease in the hash rate, i.e. the total computing power fed into the Bitcoin network by miners. From the all-time high of 146.48 EH / s on October 18, the hash rate fell in just 12 days and in the middle of the Bitcoin rally by 17 percent to currently 120.1 EH / s.
The decrease in the hash rate leads to an overload and, as a result, to long confirmation times. The fact that computing power has dropped rapidly in the last few days could be related to the end of the Chinese rainy season . During the monsoon season, there is electricity in the province of Sichuan, the absolute mining epicenter, virtually free of charge, as hydropower plants produce huge amounts of excess electricity. Miners can feed their energy-hungry mining hardware comparatively cheaply over the period. With the end of the rainy season, the mining pools are reconnecting their devices in other regions. The hash rate could therefore correct itself downwards for some time in this transition phase.
Meanwhile, the mining difficulty in the Bitcoin network has reached an all-time high of 19.997t in the most recent adjustment on October 17th, at the same time as the all-time high of the hash rate, which subsequently collapsed. The Mining Difficulty shows the difficulty of “mining” new blocks and is linked to the hash rate. Every 2016 blocks and thus approximately every two weeks, the mining difficulty readjusts itself based on the computing power and thus protects the network from attacks. Since the hash rate has dropped significantly in the last 12 days, the mining difficulty should also correct itself significantly downwards with the next adjustment on Monday.
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