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- A large jump in fees per block has come alongside raging bullish sentiment in the past.
- It was possible that history would repeat itself.
Bitcoin’s [BTC] transaction fees have been soaring. Analyst Will Clemente, while highlighting this in a recent post on X (formerly Twitter), questioned whether miners factored in the heightened activity from inscription activity into their sell price.
While it’s too early to have an answer to this question, other tangents could yield some answers.
For one, the increased transaction fee is a sign of a lively market, but in the past, such peaks have been followed by a pullback in BTC’s prices.
Would this occur once again, and should traders rely on this signal? And are miners selling more of their BTC than usual?
Examining the average fee per block
In 2017, from June to December, the average fee per block had been trending higher. It exploded to greater heights just before Christmas that year.
The demand for the new shiny coin whose prices never seemed to ebb was through the roof, and everyone wanted a part of it.
We know now what happened afterward, as prices came crashing back to earth. This brought activity down, too. It was not the first time that enormous fees would set alarm bells ringing in the minds of BTC network users.
Source: CryptoQuant
In April 2021, with Bitcoin prices near the $60k mark, the metric once more spiked to almost reach the 2017 highs. This too was followed by a sharp decline in prices.
The same story was replayed in May 2023. Over the past six weeks, the metric was once more trending rapidly higher.
Is this a sign that BTC will experience a steep drop in prices soon? Not necessarily. The rapid influx of users and demand for transactions to go through is a sign of confidence that an uptrend was strongly in place. It could be driven by FOMO too.
Therefore, traders might not want to sell their holdings or enter short positions on BTC merely because of this metric. Nevertheless, it was something to be aware of, even though a drop in prices is not guaranteed.
What does the technical analysis of BTC show?
A look at the 12-hour chart presented a clear picture of what levels traders should focus on. The $42k-$43k area was an HTF resistance from early 2022. It was breached for a few brief days earlier this month, but now it serves as resistance once more.
Source: BTC/USDT on TradingView
Hence, a move above the $43k-$43.5k area is required before there is a convincing technical argument for further gains. On the other hand, a move below the recent low at $40.2k would break the market structure.
Meanwhile, the RSI was already below the neutral 50 mark, indicating that bears have the upper hand.
Read Bitcoin’s [BTC] Price Prediction 2023-24
Below the $40.2k mark, the next support level of significance lay at $38k. AMBCrypto reported on this a week ago, and it remained a valid scenario.
A festive season with rapidly plummeting Bitcoin prices was something market participants must be prepared for.
