Bitcoin (BTC) price is fighting to secure the largest amount of monthly gains since April. The price action is trading about 3% higher this week after tagging the key short-term resistance near $13,900.
Fundamental analysis: High transaction fees
Bitcoin transaction fees climb to a 28-month high as the blockchain sees the worst congestion since 2018. The average Bitcoin transaction cost since Wednesday was 0.00086764 BTC, or $11.66, the highest in more than two years.
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Over the last 12 days, average Bitcoin fees surged by 573% together with the increase in price from $11,200 to $13,800.
“Bitcoin mempool [memory pool] is back in focus in the wake of rising transaction volumes, causing congestion in the network and consequently driving fees higher,” said Denis Vinokourov, helm of research at the prime brokerage Bequan.
Mempool refers to the bunch of unconfirmed transactions and when a BTC transaction is carried out, its first destination is the mempool, where the transactions wait for miners approval. Bitcoin is able to process just 1 megabyte (MB) worth of transactions per block mined around every 10 minutes.
Upon a surge in traffic, the blockchain experiences delays and a backlog of transactions and in instances where demand is higher than supply, miners boost their revenue by focusing on high-fees transactions. As a result, users offer higher fees to skip long queues.
Sharp price rallies are usually followed by high network congestions and as Bitcoin price substantially rose over the last 12 days, network congestion also soared by 1,800% during that period.
As of Tuesday, there were in the mempool with a total block size of 66.8 MB. According to data source blockchain.com, that’s the highest level since the bull market frenzy of December 2018.
From October 29, Bitcoin mempool accommodated 121,340 unconfirmed transactions including a block size of 66.8 MB. Crypto data provider blockchain.com said this is the highest level since the wild bullish rally recorded in December 2018.
Technical analysis: Profit-taking facilitates a correction lower
Bitcoin (BTC) price corrected lower is trading around 3% higher on the week after profit-taking pushed the price below $13,500. The bulls have hit their near-term target at $13,900, which allowed early BTC buyers to exit their winning positions.
Going into November, the price action may continue to correct from these levels. In this case, investors looking to get on the long side should wait for the price action to approach the $12,500 area before committing to a trade.
Any move below $12,000 invalidates this trading setup, while the first target on the upside in this scenario is $14,150.
Bitcoin (BTC) price is heading towards a strong monthly close as transaction fees hit the highest levels in 28 months as the network deals with the worst congestion in over 2 years.