As speculators flocked to mint BRC-20 tokens via text inscriptions, Bitcoin blockspace saw an explosion in demand in recent weeks.
This dramatic shift in network activity triggered a surge in transaction fees to levels not seen in the last two years.
Signs of Strain
A new report published by Bitfinex observed that the inception of BRC-20 and Bitcoin-based smart contracts is transforming the blockchain into a more “dynamic, smart-contract-enabled chain” from its traditional repute of a “straightforward digital currency ledger.”
Data suggested that BRC-20 tokens accounted for more than 60% of all transaction activity on the Bitcoin blockchain last week, contributing nearly 43% of all fees.
However, the rapid popularity of BRC-20 and subsequent fee surge have strained other metrics. Active and new addresses interacting with the network are nearing two-year and annual lows, respectively. Such a trend could potentially indicate that higher transaction fees are likely deterring new and existing Bitcoin network users.
The report added that while higher transaction fees have likely deterred new Bitcoin addresses from increasing, it has boosted network health. The brief bump in mining revenue was certainly a welcome reprieve for network miners after the savage bear market of 2022. So much so that Bitcoin miners earned a total of $17.75 million in revenues on May 8th.
Long-Term Bitcoin Metrics
In the short term, the events of last week, including Binance’s recent double halt of Bitcoin withdrawals, appear to be impacting the flagship crypto-asset sentiment negatively. Hence, the short-term metrics still indicate a possible pullback in Bitcoin’s price.
On zooming out, the long-term on-chain indicators, on the other hand, appeared more favorable and resemble the early stages of the previous bull markets. It was observed that a potent bullish sign for the market came in the form of Bitcoin trading comfortably above its 200 Day Moving Average as well as its Realised Price.
Another positive sign was the Bitcoin Realised HODL Multiple which was on an upward trajectory over the last 90 days. This essentially indicated that the USD-denominated wealth is moving back towards new demand inflows. In such a case, “even when profits are being realized, the market is capable of absorbing them.”
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