What Does the Surge in Transaction Fees Mean for Bitcoin?

Bitcoin has had a volatile December, from reaching an all-time high of over $19K to crashing down more than 30%. There is no dearth of reasons for why the price for cryptocurrency has been falling, from blaming the recent the hack of South Korea’s cryptocurrency exchange Youbi last week, or simply an overall reluctance by many people and governments to accept the legitimacy of the cryptocurrency.

Another reason, according to a report by Seeking Alpha, is the rising transaction fees associated with the cryptocurrency. The fees may send users scuttling to altcoins, the report argues.

This report points to the fact that bitcoin’s transaction fees are 1,000 times more than other cryptocurrencies.

Jonathan Cooper, author of the Seeking Alpha report stated:

Transaction fees will continue to hinder Bitcoin adoption and provide a rough user experience for Bitcoin users. Specifically, Bitcoin costs far too much relative to other coins, even to the mostly identical Bitcoin Cash.

Perhaps the most problematic element of bitcoin’s high transaction fees, as pointed in article, is that it’s not based on the transaction amount, as one might logically assume — so, it doesn’t matter if an investor is putting in $50, or $2 million. Bitcoin’s transaction fes is calculated based on the transaction in bytes, meaning the number of wallets used to make the transaction.

This transaction fee was less than $1 in January this year. In December, the average cost per transaction was at least $33.30, according to Seeking Alpha. That’s a 3300% increase.

Furthermore, compare bitcoin’s transaction fees to other cryptocurrencies and the issue becomes even more evident.

Today, bitcoin is trading at $16,075 as of 12 PM ET, according to CoinBase.

Read Seeking Alpha’s full take the issue here.

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Tatjana Kulkarni is Deputy Editor at Bank Innovation. Before Bank Innovation, she was the marketing coordinator at conference producer Capital Roundtable. Prior to that she was a business reporter for nearly three years at The Deal. She has an M.A. in International Relations from New York University and a B.A. in Journalism from L.I.U. Post. In her spare time she travels as much as possible, making it a point to visit at least one new country per year.

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