Bitcoin transaction backlog nearly clears as transaction volume declines substantially

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The massive decline in bitcoin price may not have had any positive effects on traders, users, or investors, but it definitely had a huge positive for the bitcoin transaction backlog as is now seen that there are just 35,000 transactions waiting to be confirmed.

This backlog is significantly lower than the 300,000 or higher backlogs we have seen at around 20 tx/s. The current transaction rate stands at around 2.2 tx / per second. Fees have also substantially fallen from their high of around $70 per transaction to around $3.

Bitcoin network seems to be processing just over 170,000 transactions a day and this is almost third of the volume compared to the 500,000 it processed on December the 14th. The network is further running at below capacity with just 2.2 tx/s, less than the around 3-4 a second it can currently handle.

According to some analysts, the reduction in transaction volumes is due to some exchanges now bundling withdrawals, so that instead of instantly sending each withdrawal to each individual, they send one withdrawal transaction to many individuals at the same time.

Exchanges, however, have been batching transactions since at least August, so it is unlikely that had such drastic effect. What might be more probable is a lower level of users in general, as show by google trends.

Alongside bitcoin, ethereum too has seen a drop in its transaction volumes from 1.3 million transactions to now around 800,000, a level that nonetheless remains significantly higher than bitcoin. The reason again ins’t very clear, but it does seem to coincide with a recent price decline from a high of around $1,400 to now around $900.

There clearly appears to be a correlation between transaction numbers and price, but whether one is causing the other or whether a third factor is causing both, is unclear. Nor is it clear whether transaction numbers are a lagging indicator as the two seem to be moving in a fairly concerted manner. But this variance in transaction numbers might indicate that the settlement system in bitcoin, which requires high fees and a high backlog, might be cyclical rather than constant. Something which might affect this new and very unproven system design.

About the author

Belinda Carey

A finance girl by education, Belinda has been drawn to cryptocurrencies ever since Bitcoin first emerged in the 2009. Nearly a decade later, Belinda is actively working to spread awareness about cryptocurrencies as well as their impact on the traditional currencies.