Bitcoin Transactions Double Previous Bull Market Levels - Bullish or Bearish?
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Market Review
Bitcoin took a plunge below $27,000 on Wednesday, throwing a fit after briefly getting excited about mildly encouraging U.S. inflation data. According to Coinglass data, traders lost a painful $47 million in BTC long positions within an hour. Ouch. To add to the fun, we're heading straight into a recession and still battling high-interest rates.
Initially, BTC's price jumped on the morning's CPI report, revealing a slowdown in annual inflation to 4.9% in April from March's 5%. Monthly, the CPI rose 0.4%, meeting expectations and higher than 0.1% in March. Bitcoin then took a nosedive to the $26,800 territory immediately after an alarm was raised about the US authorities moving 9819 BTC in preparation for a sale. However, it turned out to be a false alarm. BTC managed to bounce back slightly, inching closer to the $27,500 mark.
So, here's some advice: be cautious. Better entry points may come later this year. But who knows, we often see the opposite of what’s expected and we might even witness a pump from here. If you want to build solid long-term positions, those levels right now could be a good starting point for some dollar-cost averaging.
What else happened this week:
Bitcoin Network Transactions Double Previous Bull Market Levels
As of now, there's a staggering number of 359,418 transactions awaiting confirmation in Bitcoin's mempool, according to mempool.space. Before finding their place in the Bitcoin blockchain, transactions find themselves in the network's mempool, patiently waiting for a Bitcoin miner to choose them for inclusion in the upcoming block. It’s getting really expensive too, averaging at $26 per transaction.
So, what's behind it, and the more important question: bullish or bearish ser?!
NFTs and Meme Coins Join the Party on Bitcoin’s Network
We now have something called Ordinal Inscriptions on Bitcoin's Network which are basically NFTs and meme coins. These digital assets are engraved on a satoshi, the smallest denomination of Bitcoin, and can be designated with up to 4 MB of data such as pictures, text, or videos through a Bitcoin transaction. It's quite a feat to accomplish, made possible by the Taproot upgrade launched on the Bitcoin network on November 14, 2021. The Bitcoin ethos really has been challenged by this creation, as it combines different elements in a way that the original creators didn't anticipate. With over 14,000 tokens created on the Bitcoin network market cap (BRC-20), it's insane to see the market cap rise by more than 800% in just a few weeks:
And as usual in crypto, things have gone absolutely bonkers. We've reached a point where we're smashing new transaction records day after day, with up to 3 million transfers. And guess what happens when there are even more transactions to handle? Yep, you guessed it right - the fees shoot up through the roof.
Bitcoin got DoS Attacked!?
Clearly, the reason for the clocked network and high fees are the ordinal inscriptions we just talked about. But there’s another interesting theory floating around. Some people claim that the whole network slowdown and those crazy fees are not just a coincidence. They think it's actually an attack on Bitcoin. The attacker(s) would start sending those Bitcoin shitcoins through the Bitcoin network and pay high fees for each transaction. The result? This leaves out those who can't handle the sudden increase in transaction fees (The Jeets like you and us). Toma B sums it up pretty well:
What does this mean for the Bitcoin price?
High transaction fees can mess with Bitcoin's price in the short term. But if we assume there's a DoS attack going on, those fee-hiking troublemakers will eventually run out of cash. So, the negative impact won't stick around for long.
Our long-term view on ordinal inscriptions is rather bullish. Anything that's driving up network fees can actually benefit the overall network and act as a catalyst in the long run. They are also paving the way for fresh design ideas and adding utility to Bitcoin’s network. For now, we need to wait for further developments and improvements that will enhance scalability and reduce network congestion. Who knows, there might even be something more revolutionary on the horizon that builds upon the ordinals concept. Overall: Bullish!
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