Journalist
Posted:
- A large increase in the cost per block has historically been accompanied by raging bullish sentiment.
- It was possible that history would repeat itself.
Bitcoins [BTC] transaction costs have increased dramatically. Analyst Will Clementewhile you emphasize this in a recent post on
While it’s too early to have an answer to this question, other tangents may provide some answers.
First, higher transaction fees are a sign of a vibrant market, but in the past such spikes have been followed by a decline in BTC prices.
Could this happen again, and should traders rely on this signal? And miners are selling more of their BTC than usual?
Research into the average rate per block
In 2017, from June to December, the average compensation per block was higher. Just before Christmas that year, it exploded to greater heights.
Demand for the new shiny coin, whose prices never seemed to drop, was huge and everyone wanted a piece of it.
We now know what happened next, when prices crashed again. This also brought back activity. It wasn’t the first time that huge fees set off alarm bells in the minds of BTC network users.
Source: CryptoQuant
In April 2021, as Bitcoin prices approached the $60,000 mark, the value spiked again and almost reached 2017 highs. This too was followed by a sharp decline in prices.
The same story was repeated in May 2023. Over the past six weeks, the statistic rose again quickly.
Is this a sign that BTC will soon experience a sharp price drop? Not necessary. The rapid influx of users and demand for transactions are a sign of confidence that there was a strong upward trend. It could also be driven by FOMO.
Therefore, traders may not want to sell their holdings or take short positions in BTC simply because of this metric. Still, it was something to take into account, even though a price drop is not guaranteed.
What does the technical analysis of BTC show?
A look at the 12-hour chart gave a clear idea of which levels traders should focus on. The $42k-$43k area was an HTF resistance as of early 2022. Earlier this month it was broken for a few days, but now it serves as resistance again.
Source: BTC/USDT on TradingView
Therefore, a move above the $43,000-$43.5k area is required before there is a compelling technical case for further gains. On the other hand, a move below the recent low of $40.2k would break the market structure.
Meanwhile, the RSI was already below the neutral 50, indicating that the bears have the upper hand.
Read Bitcoin’s [BTC] Price forecast 2023-24
Below the $40.2k mark, the next major support level was at $38k. AMBCrypto reported on this a week ago and it remained a valid scenario.
A festive season of rapidly falling Bitcoin prices was something market participants had to be prepared for.