As per YCharts data, the average Bitcoin transaction fee sits at a stomach-churning $62 at the time of writing, making all but large volume transactions unviable.
Only during the last period of crypto mania, in late 2017, has transacting on the Bitcoin network been even close to as expensive.
Bitcoin transaction fees
The sudden rise in transaction fees has come about as a result of a cocktail of different factors and events which, taken alone, might not have had such a dramatic impact.
In part, the spike in fees can be attributed to high levels of congestion on the network brought about by a mass sell-off earlier this week due to a drop in the price of Bitcoin, in conjunction with the efforts of some investors to buy the dip.
This congestion issue has been compounded by a drop off in mining power, caused by an explosion and flooding at coal mines in regions of China that host a large number of Bitcoin mining outfits. With coal-powered plants unable to supply some major mining operations, the collective power of miners on the Bitcoin network dropped by somewhere in the region of 25-30%.
What’s more, off the back of a crypto bull run extending back to November, Bitcoin mining difficulty is currently sitting at an all-time high, which means more computational power is required to process transactions.
Traditionally, blocks of transactions are processed roughly every ten minutes, but the high mining difficulty and low network hashrate means some blocks are taking an hour or more to be digested, which is unprecedented.
Mining difficulty, which ebbs and flows in line with shifts in the total hashrate, is automatically recalibrated after every 2016 blocks processed (roughly every two weeks), meaning a drop in difficulty should take place by early May.
A fall in mining difficulty and the recovery of Chinese mining outfits should, in theory, be reflected in a reduction in congestion and fall in the cost of Bitcoin transactions.