Markets
Bitcoin Fees Evolve in Transaction Trends and Market Dynamics
Onchain Highlights
DEFINITION: The exchange fee dominance metric is defined as the percentage of the total amount of fees paid in transactions related to on-chain exchange activity.
- Deposits: Transactions that include an exchange address as the recipient of the funds.
- Withdrawals: Transactions that include an exchange address as the sender of the funds.
- Internal: Transactions that include the addresses of a single exchange as the sender and recipient of funds.
- Cross-Exchange: Transactions that include (separate) exchange addresses as sender and recipient of funds.
Bitcoin exchange fee dominance, represented by a 7-day moving average, has shown significant fluctuations since the start of 2024. Notably, the dominance of fees associated with deposits, withdrawals, internal transfers, and inter-transactions Stock markets have experienced periods of sharp rise and fall.
Dominance of exchange fees: (Source: Glassnode)
In early 2024, a sharp rise in foreign exchange fees occurred, peaking around early February. This increase is mainly explained by increased activity in deposits and internal transactions. As the year progressed, the dominance of FX fees displayed a cyclical trend with notable peaks in mid-May and mid-June, coinciding with increased market activity and possible strategic repositioning of investors.
In comparison, long-term data since 2017 reveals a broader trend of FX fee dominance, closely aligned with major market movements. Significant increases in trading-related fees corresponded to critical price milestones, such as the increases in late 2017 and early 2021. These periods were marked by high market volatility, reflecting increased trading volume and the he increase in on-chain exchange activity.
Recent data suggests that Bitcoin’s post-halving price and exchange fee dominance is mostly correlated, reflecting broader market conditions and investor behavior. This ongoing interaction highlights the importance of exchange-related activities in the Bitcoin ecosystem, influencing transaction costs and overall market liquidity.