Not Just Another Meme Coin Season
The growing interest in meme coins has extended its reach to the Bitcoin blockchain. Inspired by the success of the ERC-20 token, PEPE, on the Ethereum blockchain, a new wave of BRC-20 standard meme coins emerged on the Bitcoin platform. As of now, 14,200 of these meme coins exist, leading to a considerable network congestion and an increase in transaction fees. The leading token is “ordi”, with a current market cap of $514 million and a 24-hour trading volume of $128 million.
The Role of Ordinals
While meme coins have been dominating the scene, Bitcoin Ordinals had their moment of triumph as well. The number of Ordinals inscriptions on the blockchain reached an all-time high over the weekend, with over 400,000 inscriptions made on Sunday. These inscriptions, adding a layer of data on top of a Satoshi, have been surging since late April, with 74% of all Ordinals created after April 20th.
Miner Fees Skyrocket
As a result of the high volume of transactions and inscriptions, the fees paid to miners soared. An unusual occurrence was noted when Block 788,695 had higher fees paid than the miner reward, a scenario last seen in 2021. The network congestion and the rise in fees prompted leading cryptocurrency exchange, Binance, to halt Bitcoin withdrawals twice within a few hours.
Bitcoin Block 788,695 had more fees than the miner reward.
This is the first time this has happened since 2021.
Fees: 6.701 BTC
Reward: 6.25 BTC
The future of Bitcoin is secure 🔒 pic.twitter.com/vEx0epzQtS
— Leonidas (@LeonidasNFT) May 7, 2023
Network Security and Hash Rate
Despite these upheavals, Bitcoin’s network hash rate, indicative of the network’s security, has shown a robust upturn. After hitting a two-year low in October 2022, the hash rate rose to 440.7M on May 1st and has remained above 280M for the entirety of May. A higher hash rate bodes well for the network’s security and sets the benchmark for the miners’ code-cracking difficulty.
Implications for Bitcoin
The spike in interest in BRC-20 tokens and the associated rise in transaction fees have consequences. While daily transaction numbers are up, the number of active and new addresses interacting with the network has been nearing a two-year low. Yet, higher transaction fees are advantageous for Bitcoin miners, as it increases their income, making the Bitcoin network more secure and robust.
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Impact on Bitcoin’s Price
Recent events such as the launch of the Ordinals protocol and the rise in BRC-20 tokens have weighed on Bitcoin sentiment. The near-term technical momentum loss may lead Bitcoin to retest key support in the mid-$25,000s, given it drops below support around the $26,500-$27,000 area. Yet, upcoming macro risk events could improve sentiment and drive Bitcoin back towards $30,000.
What are BRC-20 tokens?
BRC-20 tokens are a new kind of fungible tokens launched on the Bitcoin blockchain, inspired by the Ethereum blockchain’s ERC-20 tokens. These tokens are typically used for speculative purposes.
What are Bitcoin Ordinals?
Bitcoin Ordinals are non-fungible tokens inscribed on the Bitcoin blockchain, using a unique numbering system for every Satoshi in existence.
How have BRC-20 tokens and Bitcoin Ordinals impacted the Bitcoin network?
The surge in the popularity of BRC-20 tokens and Bitcoin Ordinals has caused considerable network congestion, leading to a steep rise in transaction fees and pending transactions. However, these developments have also boosted miner income, leading to a more robust Bitcoin network.
How have these developments affected Bitcoin’s price?
The spike in transaction fees and network congestion has weighed on Bitcoin sentiment, causing a loss in near-term technical momentum. However, upcoming macro risk events could improve sentiment and drive Bitcoin’s price up.