Could 2018 repeat itself? Price approaching 20K and high fees followed by crash

[NotATether]

It all started when Bitcoin stabilized at 12K almost a month ago, we were having 20 sats/vbyte feed before then, then when we approached 13K after the PayPal announcement, the fees spiked to 100 sats/vbyte or somewhere around that. The state of the network today is that while it’s around $14K and $15K, the fees are going to be around 150-200 sats/vbyte.

These fees are much less compared to 2018 levels, but as we approach 2017/2018’s ATH, what is going to prevent us from having those huge fees (I don’t know; somewhere between 400 and 900 sats/vbyte) a second time? Is is that more people are going to send their transactions with a low priority fee to avoid them, and miners will ultimately get less transaction rewards from their blocks as well as a decrease in transactions per block, could all cause the price to crash a second time, which will revert to low fees having normal priority?

I want to know if there is a connection between people paying less fees and the price going down.

[wxa7115]

It all started when Bitcoin stabilized at 12K almost a month ago, we were having 20 sats/vbyte feed before then, then when we approached 13K after the PayPal announcement, the fees spiked to 100 sats/vbyte or somewhere around that. The state of the network today is that while it’s around $14K and $15K, the fees are going to be around 150-200 sats/vbyte.

These fees are much less compared to 2018 levels, but as we approach 2017/2018’s ATH, what is going to prevent us from having those huge fees (I don’t know; somewhere between 400 and 900 sats/vbyte) a second time? Is is that more people are going to send their transactions with a low priority fee to avoid them, and miners will ultimately get less transaction rewards from their blocks as well as a decrease in transactions per block, could all cause the price to crash a second time, which will revert to low fees having normal priority?

I want to know if there is a connection between people paying less fees and the price going down.

Anything can happen, however an exact repetition of the events that transpired at the end of 2017 and at the beginning of 2018 is unlikely, we know there is some level of correlation between the price and how busy is the network, but at the end what the price will do will depend on the demand of bitcoin and nothing more.

During the 2017 bull run there were several points in which it seemed as if the price could not go up anymore and there was a reduction on the price and many believed a crash was coming, and it did, just not at the level they were predicting, it is going to be very difficult for bitcoin to surpass the 20k level since psychologically many traders as soon as we get closer to it will begin to sell thinking a crash is coming, but that is where demand will prove to be critical, if the demand can still absorb all the coins being sold by those that will sell their coins during the next weeks then we are bound to see a new ATH, but if not then the price will have to come to a more stable position, like the 12k or 13k level, so as you can see this does not necessarily means that a crash is coming but we cannot discard it either.

[bitbollo]

yes it's definitely true. everything can happen but I am confident btc value will be bullish. we have seen some nice values during these days but hodling is the only solution.

Even if people are trying to spend less for their payment doesn't mean business profit of miners will be changed.
it's not the first halving, in the past it was possible also get a transaction confirmed with 0 sat/byte fees. miners has processed the same

[jossiel]

I think it's already tied up when the price goes up, fees goes up too. But if it's about the following crash, what I say is that we're already done with that. The month of March has took the crash and it's very low. Spending with lesser fees, miners will just keep going even if we pay lower fees.

it's not the first halving, in the past it was possible also get a transaction confirmed with 0 sat/byte fees. miners has processed the same

I remember that when I was a newbie, I pay nothing for fees and the confirmation was quick.

[Yaunfitda]

These fees are much less compared to 2018 levels, but as we approach 2017/2018’s ATH, what is going to prevent us from having those huge fees (I don’t know; somewhere between 400 and 900 sats/vbyte) a second time? Is is that more people are going to send their transactions with a low priority fee to avoid them, and miners will ultimately get less transaction rewards from their blocks as well as a decrease in transactions per block, could all cause the price to crash a second time, which will revert to low fees having normal priority?

Definitely, the fees will go up when we enter a bull run in 2021. Just look at how the fees is when the price goes to almost $16k in the last couple of days? However, if your transaction are going to get confirmed with less fees then why pay more? I have experimented several transaction fees, 1 sat/byte = 2 days confirmation. so it's really possible to just pay with low fees specially if you are not in hurry or something.

Edit: I don't know what you mean by 2018 though, maybe December 2017 to first quarter of 2018?

[coolcoinz]

These fees are much less compared to 2018 levels, but as we approach 2017/2018’s ATH, what is going to prevent us from having those huge fees

That situation with fees was a result of a beef of BCH devs with BTC. It wasn't a natural occurrence, but a situation which followed the segwit debate. I'm not going to explain all of it here but if you're interested there's plenty of articles from that year.
That said, it's natural for fees measured in fiat to increase when the price of bitcoin goes up. They don't go up by a lot in BTC terms, but their fiat value does, so there of course is a connection between bitcoin's fees and its price.

[exstasie]

It all started when Bitcoin stabilized at 12K almost a month ago, we were having 20 sats/vbyte feed before then, then when we approached 13K after the PayPal announcement, the fees spiked to 100 sats/vbyte or somewhere around that. The state of the network today is that while it’s around $14K and $15K, the fees are going to be around 150-200 sats/vbyte.

These fees are much less compared to 2018 levels, but as we approach 2017/2018’s ATH, what is going to prevent us from having those huge fees (I don’t know; somewhere between 400 and 900 sats/vbyte) a second time?

Nothing.

Is is that more people are going to send their transactions with a low priority fee to avoid them, and miners will ultimately get less transaction rewards from their blocks as well as a decrease in transactions per block, could all cause the price to crash a second time, which will revert to low fees having normal priority?

Why would people sending low fee transactions, or miners collecting less transaction fees, cause the price to crash? I just don't see any causal relationship here.

I want to know if there is a connection between people paying less fees and the price going down.

This is what I think happens. During a strong bull market or bubble, potential BTC and altcoin gains are in the 100s and 1,000s % range. Speculators don't care one bit about transaction fees. So speculators withdrawing from exchanges (and exchanges intent on guaranteeing fast withdrawals) drives network fees up exponentially. When the bubble pops and the associated hype dies down, all that demand for block space begins to evaporate too. Then fees return to normal.

I don't see high fees as the cause of the 2017 bubble pop at all. I think rising fees have a positive correlation with rising prices, that's all.

[Wexnident]

Aren't the fees going higher mainly due to both price increases as well as more people putting transactions into the blockchain? Also, it's more likely for Fees to be dependent on the price of Bitcoin, and not vice versa tbh. Plus, I'd like to see this growth on a positive note, much more compared to the 2018 one since the market right now is still currently building up its foundations, not like how back then in 2018 which was basically a bubble, which isn't really good in the long term.

Plus, we all know an exact repeat of history is impossible, a lot of factors back then and now are quite different.

[thecodebear]

No. When price hit $20k last market cycle it was at the tail end of a bull market, with FOMO driving millions of people to suddenly buy into crypto in an unsustainable way - as is the way with every boom-crash cycle.

The market is obviously much larger now. The price isn't skyrocketing from $5k to $20k in 2-3 months, it's been building gradually for the past 19 months, and still probably has a good number of months to go before getting back to $20k. Just like in early 2017 when the price hit ~$1100 it didn't do a repeat of 2014 and crash back to $200, and so on for every previous market cycle.

$20k will be the START of the explosive phase of the current (now 19th month old) bull market, not the end of it. $20k becomes the launching point, as was $1000+ in 2017, and $100-$200 in late 2013, and so on. $20,000 is the new $1000.

Bitcoin fees seem to have gone to high single digits this past week, but bitcoin fees always rise temporarily during a pump. But they have consistently been low single digits or very often under $1 at prices anywhere from mid-four digits to low thousand-teens. At these prices in 2017 the transaction fees were skyrocketing to $50+, now staying consistently under $1 or low single digits. That's because now $10k+ is a normal price for Bitcoin that doesn't create a frenzy, whereas 3 years ago $10k+ was hit for the first time right near the end of 7+ month crypto frenzy.

Will transaction fees go back to $50+ dollars this market cycle, undoubtedly. But it won't do that until there is another frenzy that gets millions of people trying to push through transactions all at once to send bitcoin between exchanges or between wallets and exchanges. Bitcoin will be at the very least several times its current price before such a frenzy occurs again.

[Smitty Werben Man Jensen]

I am sure it can repeat itself, look at now the price of Bitcoin is above $ 15k,
if you compare, this is to like 2018, just waiting to break through $ 19k to make a new all time high,
just hold on, the future of bitcoin is very good.

[nutildah]

You're correct here and the only thing really different from last time is this time around there are a few second layer options to consider. There's still a learning curve involved to onboard new users, but those who seek a way around having to pay crazy fees will learn how to use them. At this point LN is really on good for those who don't mind lying on custodial or 3rd party solutions, whereas Blockstream's Liquid network is pretty much ready to go, for anyone now.

I know Bitfinex allows customers convert BTC back and forth to LN or Liquid BTC free of charge -- once other exchanges adopt Liquid, I predict more everyday users will keep their bitcoin in that form in order to escape fees.

[freedomgo]

I am sure it can repeat itself, look at now the price of Bitcoin is above $ 15k,
if you compare, this is to like 2018, just waiting to break through $ 19k to make a new all time high,
just hold on, the future of bitcoin is very good.

I don't want to be the one saying that bitcoin is not going to do an ATH this year, but it's fee has really increase, it's pretty similar in the past but that is just due to the congestion happening at the moment, once the price is stable, fees will slowly go down to its reasonable value.

When I send bitcoin, I just look at the usd value of the transaction feed and today, it seems it's quite lower compared to the fees in the past few days, and we are still in $15k+ now, so eventually that fee will just drop.

[sana54210]

I agree that the $20k was unfounded for and we really didn't deserve it. There was this insane hype that allowed people to go crazy over bitcoin for a while but it was too quick to flare up like that and there was no reason to be valued there at that moment, because of all the BCH deals and all and because of many big corporations like amazon accepting it at that moment, we realized that we are on path of mass adoption and crypto everywhere and by that time everyone and their grandmother got involved with crypto.

This was just pure empty hype and we dropped as much as $3k next year. This year the increase is not like that, we have been over $7k consistently except few pandemic period, and we have been over $10k for months now, like at least 3 or 4 and now we reached over $15k, which means this is a lot more sustainable.

[buwaytress]

In all probability, why not? Always believed it has equal chance of being zero as 1 million, below 12k still can't be written off, nor even below 10k, which is why I'm hoping we don't end 2020 on an incredible bull run, as tempting as the prospect is. Much rather see repeated bounces off $15k like today before chugging up to 17k. Running out of time for a 2018 crash though!

[BrewMaster]

i disagree with your starting point, it doesn't start after months of price rise and over a year after the accumulation. instead the repetition starts from the day the previous bubble bursts. meaning first days of 2018 when price was falling from $20k.
from that day the whole thing starts to repeat. first by the bubble pop and all the drama that brought price to $3k and all we had so far to $15k and all what we will have until $50k to $100k bubble which would be when the next cycle begins.

as for the fees, the only connection i see is when price becomes stable and fees go down. it doesn't matter if price is falling or rising. for example we saw pretty much the same fee spike when price fell $2000 and when it rose $2000 this year.

[exstasie]

You're correct here and the only thing really different from last time is this time around there are a few second layer options to consider. There's still a learning curve involved to onboard new users, but those who seek a way around having to pay crazy fees will learn how to use them. At this point LN is really on good for those who don't mind lying on custodial or 3rd party solutions, whereas Blockstream's Liquid network is pretty much ready to go, for anyone now.

I know Bitfinex allows customers convert BTC back and forth to LN or Liquid BTC free of charge -- once other exchanges adopt Liquid, I predict more everyday users will keep their bitcoin in that form in order to escape fees.

I just wish there was more pressure on exchanges (from users) to stop burdening the network so much. They are taking years just to batch transactions or support Segwit. Who knows when widespread support for the Liquid sidechain or Lightning will ever happen?

Inter-exchange transfers are a huge part of the congestion problem, probably the single biggest factor if I had to guess. Liquid is extremely well suited for that exact use case (instantly transferring BTC or USDT value between exchange accounts) but since only a couple major exchanges support it, it's pretty useless right now.

When fees start spiking again, people will blame Bitcoin. They should be blaming exchanges for doing nothing to alleviate the problem.

[NotATether]

I just wish there was more pressure on exchanges (from users) to stop burdening the network so much. They are taking years just to batch transactions or support Segwit. Who knows when widespread support for the Liquid sidechain or Lightning will ever happen?

Inter-exchange transfers are a huge part of the congestion problem, probably the single biggest factor if I had to guess. Liquid is extremely well suited for that exact use case (instantly transferring BTC or USDT value between exchange accounts) but since only a couple major exchanges support it, it's pretty useless right now.

When fees start spiking again, people will blame Bitcoin. They should be blaming exchanges for doing nothing to alleviate the problem.

I'm curious to know just how badly exchanges are clogging the network. Are they sending high valued transactions, which implies they have enormous number of bytes? I'm guessing several of these at once make the task of inserting them into blocks take longer for miners.

[exstasie]

I just wish there was more pressure on exchanges (from users) to stop burdening the network so much. They are taking years just to batch transactions or support Segwit. Who knows when widespread support for the Liquid sidechain or Lightning will ever happen?

Inter-exchange transfers are a huge part of the congestion problem, probably the single biggest factor if I had to guess. Liquid is extremely well suited for that exact use case (instantly transferring BTC or USDT value between exchange accounts) but since only a couple major exchanges support it, it's pretty useless right now.

When fees start spiking again, people will blame Bitcoin. They should be blaming exchanges for doing nothing to alleviate the problem.

I'm curious to know just how badly exchanges are clogging the network. Are they sending high valued transactions, which implies they have enormous number of bytes? I'm guessing several of these at once make the task of inserting them into blocks take longer for miners.

I'm lazy to pull up the blockchain data now but I remember looking into some exchange hot wallets (Binance for example) to see what kind of fee rates they were paying. And that's really what matters, fee rates, not the total size of batched withdrawal transactions. Anyway, I remember Binance was paying insanely high fees at the time, rates like 150+ satoshi/byte when 10-20 satoshi/byte transactions were getting confirmed within a few blocks. Other exchanges do it too. Exchanges consistently drive up fees for the whole network in this way.

One example:

Because BitMEX broadcasts thousands of transactions at once at the same time every day, it leads to a fee increase every day, 0xb10c contends.

“Every day at around 13:08 UTC (9:08 a.m. ET), multiple megabytes of optimized transactions, mostly user withdrawals, are broadcast by BitMEX. The effect is immediately noticeable as a spike in the feerates, which estimators recommend and users pay,” 0xb10c told CoinDesk. His research indicates that this has been going on since at least September.

“It’s a bit strange to realize that fees would be close to 0 if exchanges used better practices. Their profligacy helps maintain the fee pressure,” tweeted Nic Carter, co-founder of crypto data provider CoinMetrics, in response to 0xb10c’s research.

https://www.yahoo.com/news/bitmex-making-bitcoin-network-more-192227680.html

[el kaka22]

Obviously exchanges do have to pay a lot more money because they want other peoples money to be withdrawn as quickly as possible, they do not do it because they want to, they do it because it is not their money to hold and they need to send it as quickly as possible. However they could simply move to lightning network as an option for people and that would change a lot of things.

When you do not even provide it as an option LN will never get a hold in the door, but when you do offer option of paying 150s/b versus 5 s/b people will see the difference and say "maybe I should move to LN as well?" and that would help LN to get more famous. At the end of the day if we are looking at what they do, we should not criticize them for using high fees, we should request them to completely change the method they are using.

[bitbunnny]

Although the situation seems pretty much the same like in 2017 and 2018 circumstances are quite different. Although the price is on the rise we are still far away from 20k. Yes, the transaction fees are increasing too but to my opinion that is mainly due to price increase itself and the enlarged number of transactions.
I'm not saying that 20k is impossible but still it's s very lomg road to go.