In a Bitfinex report they have analyzed how the emergence of the new type of tokens on the Bitcoin network has caused a major stir for bitcoiners, and at the same time shows metrics that suggest that an uptrend may be coming soon.
The report explains that:The Bitcoin network is experiencing a significant increase in transaction fees, driven by a growing interest in BRC-20 tokens and the advent of Bitcoin-based smart contracts. This change in network activity is having a dramatic impact on the Bitcoin blockchain.”.
This new BRC-20 token standard is a type of fungible tokens operable on the Bitcoin network, inspired by the ERC-20 tokens of the Ethereum network. The report points out that the week of May 8: “A group of developers implemented a set of Uniswap smart contracts directly on the Bitcoin blockchain, inaugurating a potential new chapter for the network. A newly formed Bitcoin-based decentralized exchange (DEX), dubbed Trustless Market, allows users to trade Smart BRC-20 tokens, provide liquidity, earn a two percent transaction fee, and issue new Smart BRC-20 tokens.”.
All this has generated a great movement in the Bitcoin network to the point of occupy more than 60 percent of all transaction activity of the Bitcoin Blockchain”last Tuesday, contributing to 42.8 percent of all fares“, according to data from Dune.
Split of BTC transaction fees – Source: Dune Analytics
The data collected by the report shows that it was registered a high peak of more than 543,000 daily transactions on the Bitcoin network the week of May 9.
Average Bitcoin Transaction Fees – Source: Glassnode
In the same way, the data collected from Glassnode reflected in the report reflects that, in this euphoria for the new tokens that have been able to be generated in the Bitcoin network, transactions had a historical peak, as have the rates of the transactions.
These fees came to be worth close to $30. Despite this wave of activity on the network, other data indicates that: “Active and new addresses interacting with the network are nearing two-year and annual lows, respectively, suggesting that rising transaction fees are deterring new and existing users of the Bitcoin network.”.
network effects
Within the same analysis that Bitfinex does, it is observed that Bitcoin miners have been benefiting from the increase in these fees for the transactions that are recorded.
Commission rate multiple – Source: charts.bitbo.io
Bitfinex shows on this chart the Fee Ratio Multiple (FRM), which is the representation of the relationship between the income of miners from the issuance of new bitcoins and those from commissions per transaction.
In this sense, the numbers they have shown indicate that these incomes have fallen drastically from more than 68 new bitcoins in mid-April to around 2.33 bitcoins last Monday, May 8.
This is making the fact that the miners of the Bitcoin network at some point are going to benefit exclusively from these transaction fees take on more force. Faced with this not so distant possibility, the FRM metrics imply a possibility of extension of the survival of this fundamental part of the network.
However, the data on the cost of transactions and the low level of wallet addresses intervening in the network, Bitfinex interprets as a user migration sampleprecisely because of the high costs of these transactions.
They also consider thatThe Fee Ratio Multiple accurately conveys the current cost and is therefore a superior metric for network health than potentially misleading market capitalization metrics”.
They have ensured that these recent innovations in the Bitcoin network are a value-added proposition. Despite this, the stoppage of bitcoin withdrawal by Binance, for example, and the increase in the costs of transaction commissions, currently do not generate good expectations and cause some actors to lose confidence in the network and consequently in the crypto asset.
Projections for the price of bitcoin
The report also shows that some metrics on the Glassnode portal indicate that we could be in the presence of a bullish current.
Realized price and 200-day moving average with the price of BTC – Source: Glassnode
The analysis of the graph is made up of eight indicators, according to the report. These indicators help determine a number of things, including whether bitcoin is trading above crucial price patterns.
Another use is to determine if the momentum of network utilization is picking up, if market profitability is picking up, and if the balance of dollar-denominated bitcoin wealth is in favor of long-term holders.
Bitfinex explains that when all eight indicators flash green, it has been a powerful bullish sign for the bitcoin market. Currently, all eight indicators are flashing green, which is a positive sign.
The first two indicators show that Bitcoin is trading comfortably above its 200-Day Moving Average, as well as its Realized Price. Breaking above these key levels is seen as an indicator that near-term price momentum is turning positive.
This situation was observed at the beginning of the year and keeping the price above these levels is also bullish for the price in the long term, as can be seen in the previous image.
RHODL 90-Day Multiple Uptrend – Source: Glassnode
The Realized HODL Multiple of bitcoin is another important indicator. It has been on an upward trajectory over the last 90 days, which is a bullish sign according to the metric documentation.
An increase in the 90-day Realized HODL Multiple suggests that dollar-denominated wealth is flowing into new demand inflows, indicating that even when profits are being made, the market is capable of absorbing them.
The report also relates that this indicator suggests that long-term holders are starting to diversify their investments into other cryptocurrencies.
The “memecoins”, for example, have attracted a lot of attention and liquidity in recent weeks, drawing attention away from other altcoins, even as the ethereum price saw a slight drop from its high of $2,100.
“Under normal market conditions, it is rare for small caps to rise without Ether showing at least some price stability. This has created considerable selling pressure on most projects, especially at the start of the week.”, the report states.
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