While Bitcoin’s average transaction fees more than doubled in the past week, Ethereum’s are on the decline, according to data from BitInfoCharts. An exodus from a large cryptocurrency exchange accused of money-laundering could be partly responsible.
The average cost of processing a Bitcoin transaction, which must be paid to the miners that process each transaction on the Bitcoin blockchain, is $4. On Sunday, September 27, the same transaction cost an average of $1.5.
The average cost of an Ethereum transaction also rose at the beginning of the week, from $2.3 on Sunday to $3.6 on Tuesday, an increase of 57%. But then fees sharply declined, tumbling back down to $2.3 by Friday, the most recent date for which BitInfoCharts has data.
Transaction fees rise when lots of people move cryptocurrency at once. This is because the demand for miners to process cryptocurrency transactions outstrips the supply, so miners hike up their fees.
This means that Bitcoin’s transaction fees are almost double those of Ethereum. But Ethereum, not Bitcoin, is known for having sky-high transaction fees these days.
That’s largely the consequence of this summer’s DeFi (decentralized finance) boom, during which investors flooded the network with around $10 billion, hoping to reap some of the rewards offered by Ethereum-based DeFi protocols such as Compound, Aave and Uniswap. On September 2, an average Ethereum transaction cost $14; then, the average Bitcoin transaction cost $4.6.
So, why has Bitcoin edged out Ethereum this week? It could have something to do with a cryptocurrency exchange called BitMEX. On Thursday, the United States Commodity Futures Trading Commission filed money-laundering and criminal charges against BitMEX and its founders. This caused an exodus of the Bitcoin held on the exchange.
BitMEX is the fifth largest derivatives exchange, and crypto metrics site Glassnode tweeted yesterday that traders withdrew almost 40,000 Bitcoin from the exchange—a large chunk of the 170,000 Bitcoin ($1.8 billion) held in BitMEX’s wallets, or almost 1% of all Bitcoin in circulation.
Still, the charges were filed on Thursday, and fees have been rising since last Sunday. Bitcoin’s transaction fees haven’t been this much higher than Ethereum’s since the end of August. On August 27, Bitcoin’s average transaction fees were $4.2, compared to Ethereum’s, which were $2.4. (Coincidentally, on this day, Ethereum’s fees were also 57% of Bitcoin’s fees).
Published in: Decrypt