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The Bitcoin mempool has been flooded with high fee transactions over the last few weeks. While it's since been resolved, it's worth investigating why fees were so high and where they came from.
The fee spike was more than likely the result of the Terra/Luna death that sent the price of Bitcoin from $35,000 to nearly $25,500 during the second week of May. The cascade of sell orders triggered a large amount of transaction fees of some 12-15 sat/vByte (seen in green) along with much lower fees waiting in queue of about 1-2 sat/vByte (pink).
Because of the sell orders, Binance decided to dump 100 blocks worth of transactions at 14 sats/vByte (green) to the mempool, according to Chaincode Labs research engineer Mark Erhardt on Twitter. The fees alone
were worth an estimated 14 BTC alone. By doing this, Binance got in front of the market while also blocking out all other transactions that were not willing to pay higher fees. It took around three days to clear the high fees while the rest of the fee market waited their turn.
The mempool has since cleared, and Bitcoin saw a large increase in its revenue percent in fees, a rise from around 1.2% to 3.5%. Total fees peaked at 30 BTC on May 13th and have since reduced, marking the end of the Luna-induced crash.
-Mitch Klee
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Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any investment or to adopt any investment strategy. This information is for educational
purposes only and is as of the date of that particular presentation. Compass does not guarantee profits from mining activity.
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