After spiking a week ago to levels last seen in February 2018, the average Bitcoin (BTC) transaction fee has fallen by more than half.
BitInfoCharts data shows that Bitcoin’s average fee decreased by nearly 54% from $6.65 on May 20 to $3.07 on May 25. The median — or most common — fee peaked at $3.91, but has now fallen to $1.65.
Bitcoin Cash proponent Hayden Otto told Cointelegraph that if network congestion continues, it will push users to altcoins. He believes this happened in 2017:
“When BTC is operating at capacity with a huge backlog of transactions, it will slowly [lose users to altcoins] again. [...] I'm sure most people trying to move funds around would convert to another coin before withdrawing from exchanges.”
Bitcoin median and average transaction fee May 20-May 25 chart. Source: BitInfoCharts
Altcoins capitalize on Bitcoin’s congestion
Otto is founder of BitcoinBCH.com, and he argues that there is a direct correlation between Bitcoin congestion resulting in the higher fees we’ve seen recently, and users moving to competing cryptocurrencies. According to him, “this results in BTC’s market dominance declining while that of competing cryptos explodes.”
As Cointelegraph reported in early May, there was a considerable amount of speculation that Bitcoin’s block reward halving might destabilize its blockchain. Otto argues that the halving did indeed have this destabilizing effect on Bitcoin’s functional dynamics, although this was beginning to smooth out.
He said the number of unconfirmed transactions held in Bitcoin’s mempool recently stabilized at just over 20,000, after having reached this year’s highest level of more than 80,000. Otto suggests this is a sign that the Bitcoin network is regaining stability after its economy changed in the wake of the latest recent halvings.
On May 20, Bitcoin’s mining difficulty dropped by about 6 percent. Otto says that this difficulty adjustment is helping decrease the network’s congestion, but one adjustment may not be enough:
“We have already had one difficulty adjustment since the halving but it will take another one or two adjustments until it settles. Due to a decline in hash rate, blocks are being produced slower. BTC's hash rate has dropped nearly 30% since the halving and the difficulty only lowered by 6%, thus difficulty will need to decrease further before blocks are mined at 10 minute average intervals."