The team at Compass Mining writes in a blog post that it is noticeable that in every crypto bull market, there seems to be “a lot of new entrants.”
As noted by Compass Mining, a frenzy takes place and people get really excited when they “start seeing large increases in price.” However, what do fees have to do with the digital asset bull market and how are they related to the Bitcoin (BTC) price?
The Compass Mining team points out that the total transaction size “continues to grow.” They also mentioned that people are willing to “pay higher fee prices in a bull market.” They added that fees are “priced in USD not in BTC.”
During the last 12 years, the number of transactions going through the Bitcoin or BTC network have been increasing steadily. Compass Mining further noted that significantly more people are making transactions “on a global monetary network with some mechanisms to keep the transaction fees low.”
Recently, BTC has seen “an efficiency increase with SegWit improving the way people make transactions but this isn’t the only reason transaction fees are low.”
Compass Mining added that as it stands now, the Total Bitcoin Transaction Size is “recovering from its drop in Q2, but generally continuing its uptrend.”
The company also noted that there are “a few other things that can be gleaned” from these developments.
Looking back at each crypto market bull trend, there was “a huge drive in the average fee (BTC),” the team at Compass Mining notes while adding that it is “safe to assume that during large increases in price, people are willing to pay a higher price for their fees, generally because there is much more demand.”
The company added that there was “a cap on the dollar amount to what people are willing to pay.” This was “based in USD not BTC and at around $45 per average transaction.” Compass Mining also mentioned if you follow the BTC average fee, it is “much lower than last cycle.”
The company continued:
“If people are the ones willing to pay higher fees each bull market, it isn’t unreasonable to assume that they also have a USD fee limit in mind. What this says is that people are pricing their fees in dollars not satoshis. It seems that people are starting to put a price on how much it is worth to send an on-chain translation, much like how much an apple, or product might be worth.”
According to Compass Mining, there may be other factors at play here, “but at least there is a sense of what the average person is willing to pay in fees.” It should be interesting continuing to “watch this trend in the coming years as the Bitcoin price changes and more data is provided,” the company added.