Daily Bitcoin News Update
Bitcoin users have long been facing a Catch-22 situation. Here’s what it looks like: When too many people begin using Bitcoin, transaction fees shoot up, making it expensive to use. Rising fees discourage users. As they begin to exit, fees begin to drop. Declining fees, in turn, attract more users. And the cycle goes on and on.
But Bitcoin may have finally found a way out of this vicious cycle. Before we get to it, here’s a brief market overview for today.
On Friday, Bitcoin prices are shifting sideways as the crypto market struggles to find firm footing. After a significant dip yesterday, BTC prices have seemingly found a floor at $10,000. The price slump was shocking given that there was no bad news to alter investor sentiments. Instead, we had quite a few bits of good news to welcome.
Chart courtesy of TradingView.com
This week, Bitcoin users have witnessed something interesting. Bitcoin seems to be overcoming its biggest shortcoming. Bitcoin’s transaction fees are dropping. Users who have had to pay as high as $30.00 per transaction in early January are now paying an average $2.00 a transaction.
The most plausible reason why transaction fees have significantly dropped is that the number of transactions on the network has halved from the December highs when we were in a bull market. In fact, Bitcoin transactions are now at one-year lows as average fees drop to four-month lows. (Source: “Bitcoin Transactions historical chart,” BitInfoCharts, last accessed February 23, 2018.)
So, are we facing another Catch-22? Not really. There’s another side of the picture that we’ve overlooked. Although part of the drop in fees is owed to declining transactions, there’s one piece of the puzzle we’re missing. It’s “SegWit” or “Segregated Witness.”
Bitcoin is now processing close to 15% of the transactions with SegWit. Although that’s not substantial, it still means that roughly one in seven Bitcoin users didn’t have to face a Catch-22.
In layman terms, SegWit is the minor tweak in Bitcoin’s code that allows it to process transactions quickly with minimal fees. Bitcoin currently doesn’t fully support SegWit, but some time soon, it will. That’s because the next upgrade to Bitcoin’s code, Bitcoin Core version 0.16.0, will fully integrate SegWit.
Separately, major crypto exchanges are likewise independently adopting SegWit. Two of the world’s biggest crypto exchanges, Coinbase and Bitfinex, have already begun testing SegWit for Bitcoin. In fact, Coinbase is rolling out SegWit as early as next week. In short, Bitcoin will soon be taking the burden off the miners’ shoulders, making way for users to transact inexpensively.
Crypto markets are highly unpredictable, which is why we’ve always urged our readers to focus on the long term. Bitcoin’s SegWit adoption is one reason why we remain optimistic in our Bitcoin price forecast 2018 with a BTC price target of $15,000.