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Bitcoin Fees Surge as Excitement Builds Around Spot BTC ETF

20 Nov 2023

Mitchell Nixon

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The nearing approval of a spot Bitcoin ETF in the US has driven up demand for the cryptocurrency, causing a spike in transaction fees.

On November 16, the Bitcoin blockchain recorded $11.6 million in fees, as per CryptoFees data. Presently, YCharts notes an average fee of $18.69 – a 113% increase from the prior day and a staggering 746% surge from a year earlier.

Bitcoin has sustained 18-month highs, surpassing its bear market range, currently trading at $37,130. The ascent began with BlackRock’s spot BTC ETF application to the SEC in June, followed by submissions from major US asset managers like Fidelity, ARK Invest, and WisdomTree.

A spot Bitcoin ETF tracks Bitcoin’s price, directly purchasing Bitcoin as its underlying asset. This allows investors to engage in Bitcoin’s market using their standard brokerage accounts, offering exposure to BTC price shifts without the necessity of buying it on a crypto exchange.

Anticipated to attract institutional investments, a spot Bitcoin ETF could drive Bitcoin’s price to unprecedented levels in the upcoming months. Bloomberg analysts estimate a 90% likelihood of approval for all proposals within the same batch by January.

Additionally, market analysts link the surge in BTC’s transaction fees to the resurgence of Ordinal Inscriptions. These digital assets, similar to NFTs but based on BTC’s smallest unit (satoshis), gained attention earlier in the year, marking Bitcoin’s foray into the NFT realm.

Although initial interest subsided with market changes, a renewed interest emerged as these assets expanded to other blockchains such as Polygon and Litecoin.

Despite worries about elevated transaction fees dissuading BTC users, on-chain data suggests a contrary movement.

According to IntoTheBlock, Bitcoin adoption has hit a new yearly peak, reaching 67.62% this week. This surge denotes a rise in freshly established active addresses, indicating an influx of new participants in the market. Additionally, the quantity of BTC held by long-term investors has reached a record high, with over 1 million addresses possessing more than 1 unit of Bitcoin.

Santiment, a blockchain analytics firm, further supports these observations, highlighting a growth in smaller wallets holding less than 1 BTC.

“Bitcoin’s wallets have fluctuated during this major market-wide surge. Tons of new smaller wallets with less than 1 BTC have flooded the network. Meanwhile, the 1-100 tier has flattened out, and the 100+ tier may be in the midst of some profit-taking,” Santiment stated. 

While soaring transaction fees pose challenges for Bitcoin users, certain market analysts view them as a positive advancement. They argue that these higher fees contribute to fortifying the security of the Bitcoin blockchain.

Furthermore, the notably expensive transactional engagements benefit struggling miners responsible for upholding and securing the Bitcoin network. They receive BTC fees as rewards for processing users’ transactions.

This holds particular significance for miners as Bitcoin’s upcoming quadrennial halving event, slated for April 2024, draws near. This event will reduce block rewards for the industry by 50%.

Mining Store/Imperial Wealth is certainly playing their role!