CME Economist Believes Higher Trading Costs Could Cause Price Slump bitcoins.
Erik Norland, executive director and senior economist at CME Group, a US derivatives trading company, published an article that said the rise in the cost of bitcoin transactions could be an early warning indicator. an imminent crash of bitcoin prices.
The average transaction cost is calculated by dividing miners' incomes – which include both transaction fees and block rewards – by the number of transactions made on the network. Although named in the same way, it is important to note that the transaction cost is a measure separate from the average transaction fee, which refers exclusively to the fees paid by bitcoin users for their transactions to be recorded in the blockchain
Currently, miners earn only nine percent of their income from transaction fees; the rest is subsidized by the block reward. This is why the average transaction costs are so much lower than the cost of the transaction – although many users continue to protest that the fees are too high.
Norland notes that in 2010 and 2013, the average transaction cost climbed just before severe price corrections, perhaps indicating that Bitcoin had become overbought in relation to its network utility. In 2010, the cost per transaction reached parity with the bitcoin price, which was then estimated at about $ 30. In 2013, bitcoin climbed to nearly $ 1,000 before the collapse of the bitcoin exchange. Gox, and the cost of the transaction increased by $ 80.
The current bull market has increased the cost per transaction to about $ 74, according to data from Blockchain.info, a factor that, according to Norland, is "worrisome" for bitcoin and could "herald another correction".
"With the price of bitcoin around $ 10,000, could the market support transaction costs of $ 80, $ 100 or more without demand and prices collapsing?", He asks. "The answer to this question is not known at the moment, but we will probably know at some point in 2018 or 2019".
Of course, Norland's research ignores the fact that bitcoin is, to some extent, used differently than in 2010 and 2013. Over the years, users have come to consider the bitcoin as a store of value. of "digital gold". This factor, combined with higher fees (compared to their equivalent in US dollars, that is), has prompted a much lower percentage of users to routinely engage in low value transactions. . Therefore, comparing current transaction costs to 2010 and 2013 data may not be a comparison between apples and apples.
Nevertheless, the search presents merchants with an interesting data point, especially as CME and its Chicago Cboe colleagues prepare to launch bitcoin futures later this month.
Image from Shutterstock.