By George Ward
According to a recent analysis by cryptocurrency market expert Ali Martinez, a decrease in the number of Bitcoin wallets indicates a reduction in user adoption rates and demand for the cryptocurrency, which could lead to a price drop. The latest development comes amid an increase in BTC transaction fees, which spiked by 10x over the weekend.
Low BTC Demand
Martinez noted that fewer wallets indicate that only a few people actively use BTC. As a result, this reduces the demand for Bitcoin, leading to a price decline.
The erratic movement of Bitcoin prices has recently been a cause for concern, as the cryptocurrency has exhibited an unusual pattern of lower highs and lower lows. This trend is particularly alarming, given the volatility in the crypto market.
Various factors have contributed to the decrease in the Bitcoin adoption rate among users. One possible cause could be investors’ redirected attention towards alternative cryptocurrencies or different investment prospects.
Additionally, the recent surge in Bitcoin fees, reaching the highest level since May 2021, may have discouraged some users from further using the asset. Providing his expert analysis of Bitcoin’s recent price movements, Michael van de Poppe shared his thoughts on potential short-term price targets to watch.
In his tweets, van de Poppe emphasized that the critical level for Bitcoin to surpass was $29,200. However, despite experiencing a slight uptick in price towards that level, Bitcoin could not break through.
Furthermore, the recent halting of Bitcoin withdrawals by Binance, a leading cryptocurrency exchange, due to regulatory concerns has added to the growing FUD (fear, uncertainty, and doubt) surrounding the asset. This development has potentially contributed to the already existing negative sentiment surrounding Bitcoin.
Providing his outlook on Bitcoin’s future price movements, the analyst recommended exploring potential long positions at either $27,400 or $26,800. He also emphasized that the target should be aimed at the CME gap of $29,600.
While this suggests a possibility for a price increase, investors should exercise caution, and traders should continuously monitor the situation.
BTC’s Transaction Fees Surges By 10x
Despite little market activities on Sunday, May 7, users utilizing the Bitcoin network paid 403 BTC in fees, a noticeable increase from the recent trend. Notably, there has been a significant surge in Bitcoin fees since the start of this month.
Throughout April, Bitcoin miners earned around 20 to 40 BTC daily. However, on-chain data from the start of this month shows that the pace has accelerated with a notable increase in earnings for miners.
Moreover, the recent increase in Bitcoin fees can be attributed to the slow adoption rate of the 2017 network update, segregated witnesses (SegWit). While SegWit was intended for a different purpose, it is now being utilized to accommodate the growing number of transactions on the Bitcoin network.
The primary objective of the SegWit upgrade was to encourage the adoption of second-layer scaling solutions such as the Lightning Network (LN) or Blockstream’s semi-proprietary products like the Liquid sidechain. In addition, the upgrade aimed to alleviate network congestion and reduce transaction fees.
The Lightning Network (LN) and Liquid sidechains rely heavily on signatures to establish coin ownership across the base blockchain and the second layer. Therefore, the signatures used by these layers were granted a 75% discount on fees.
However, despite this cost reduction, the LN and Liquid sidechain has yet to gain significant use. After reaching the $30,000 mark on Friday, the price of Bitcoin dipped toward $27,800 at the start of the day’s trading session.
It currently trades at $27,883, according to Coingecko data, and is down 3.9% in the last 24 hours. Meanwhile, Binance’s decision to suspend Bitcoin withdrawals on its platform has sparked controversies within the crypto ecosystem.
Recall that Binance suspended BTC withdrawals twice on Sunday, citing the massive volume of withdrawals of the leading cryptocurrency.