Bitcoin isn’t missing out on the recent crypto price jumps, but it’s also joining Ethereum in a less impressive way—higher fees.
Bitcoin fees are on the rise again, approaching levels last seen during the recovery from the March 2020 crypto crash, which was linked to the corresponding stock market decline.
On Thursday, they hit an average of $3.841, an increase of 151% since last Sunday. They’ve since fallen slightly; yesterday, the average Bitcoin transaction cost $2.9, according to BitInfoCharts.
The surge could mean that all-time-high DeFi-driven activity on the Ethereum network is spilling over onto other blockchains too, as Ethereum and DeFi lead the way towards the next crypto bull run.
Transaction fees are tied to the level of activity on the Bitcoin network, so when lots of users are buying or selling, fees go up.
The last time Bitcoin fees saw a serious spike was in May, when BTC prices rose from $7,900 to about $10,000 in a bit more than a month. On the heaviest day, May 20, it cost more than $6.60 on average to broadcast a Bitcoin transaction.
Bitcoin fees reached their highest level ever during the final days of 2018, when ICO mania was at its height and Bitcoin prices were pushing $20,000. At that time, average Bitcoin transaction fees peaked at a jaw-dropping $54 per transaction.
Rising crypto prices and network activity can be traced back to DeFi trends on Ethereum. Seeking to increase the funds available for DeFi customers to use in loans and token swaps, many protocols are now distributing governance tokens as a reward for locking up crypto in protocols such as Compound and Balancer. As a result, Ethereum is attracting new users and seeing transaction volumes approaching the limits of the current Ethereum architecture.
By virtue of being first on the scene and approaching status as something resembling a household name, Bitcoin often acts as a bellwether for the whole of crypto.
Increasing activity on the network is a positive sign for adoption, but fees at the current level for an industry that has billed itself as a less expensive alternative to traditional banking may drive off potential users. The need for technological advancement is becoming more urgent. Handily, one major solution, Ethereum 2.0, is not too far off.