I have been tracking Bitcoin fees for a while and have noticed that fees can vary widely. The same transaction could be less than $2 or more than $20. It turns out there are several reasons why this happens.
Network congestion: Bitcoin blocks are limited to approximately 1MB, so only a few thousand transactions can be processed every 10 minutes. When demand exceeds capacity, users bid higher prices to gain priority. This situation becomes even more intense during a bullish rally or major news event.
Limited block space: 1MB block size is a fundamental constraint. If 10,000 people want to send Bitcoin in the next block, but only 3,000 transactions fit, the 3,000 with the highest amount will be sent. Others wait or increase their fees.
Ordinal numbers and inscriptions: Since 2023, people have been using ordinal numbers and runes to store non-fungible tokens (NFTs) and data directly on the Bitcoin blockchain. These transactions are much larger than regular payments, consume block space, and crowd out standard transfers.
Bitcoin Halving In 2024, miners’ rewards will be cut in half. To compensate, miners are now even more prioritizing transactions with higher fees. This structural change means that fees may increase over time.
Transaction size: Fees are not based on the amount of BTC you send. These are based on transaction size in bytes. If Bitcoins come from many small inputs, the transactions will be large and costly.
Has anyone had success using any strategies to lower BTC trading fees? I’m especially interested in your actual experience in day-to-day trading.
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