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Bitcoin’s surging popularity is putting its network capacity to the test. As a result, Bitcoin’s transaction fees have almost tripled during this week’s bull run. At the same time, Ethereum reaps DeFi benefits by outcompeting Bitcoin in transaction fee revenue.
PayPal Triggers Bitcoin’s Bull Run
Prior to news of PayPal allowing the transfer of Bitcoin on its platform by mid-2021, Bitcoin already enjoyed positive social media coverage and an upward trajectory. However, it took PayPal’s major announcement to break BTC’s $12k resistance.
Now, we are heading toward a $14k resistance breakthrough, thanks to institutional investors taking notice. Square acquired $50 million worth of Bitcoins, JPMorgan did a 180-degree shift on Bitcoin, and London’s Mode Global Holdings PLC announced it will use up to 10% of its cash reserves to buy Bitcoin as a treasury reserve asset.
These major happenings are all in sync with the growing fear of inflation, i.e. devaluation of USD and other national currencies, as Western nations plunged into pandemic-induced recession. Not without consequence, Bitcoin’s newly-boosted popularity has a negative to it – transaction fees going from $3.52 to $10.20 in just the last three days.
Ethereum Miners Outpacing Bitcoin
Thanks to on-chain market analysis from Glassnode, we can see that the latest BTC bull run resulted in the highest transaction fee revenue since January 2018. This comprises 22.25% of BTC miners’ revenue, while the rest comes from block rewards.
At the same time, ETH miners’ fees are at their highest level. Ethereum network owes this surge to the rapid expansion of DeFi protocols, which almost entirely rely on the Ethereum network, and the accompanying spike in the use of stablecoins.
Although Ethereum (ETH) is dwarfed by Bitcoin (BTC) in terms of market share, with ETH having 5.5x less market cap at $43.9 billion, ETH fees surpassed BTC. Over the last day, ETH fees have grown to $1.74 million, leaving BTC behind at $1.54 million miner fee revenue.
This indicates that the Ethereum network, as infrastructure serving DeFi protocols, is more active than Bitcoin, even as Bitcoin possibly heads toward toppling its all-time price height of 2017. It also bolsters the narrative that more people view Bitcoin as an alternative to gold rather than a payment method for online shopping.
However, we have yet to see the impact of Vitalik Buterin’s belated Ethereum network upgrade. Some ETH miners have already expressed their displeasure at such advancement as it will likely curtail their income. Either way, the upgrade needs to take place to facilitate DeFi’s growth.
Between Bitcoin and DeFi, the crypto space has never been more exciting. Which one do you see as more important to wean us off centralized models of finance?