China’s crackdown on crypto mining and exchanges unsettles the crypto community. FUD is nothing new to crypto maximalists, but these prices might be— large-cap cryptos like Bitcoin and Ethereum have almost halved from their peaks.
The FUD impacts big blockchains in new ways: fewer transactions and less on-chain activity. Gas fees (transaction fees paid by users to miners) associated with “proof-of-work” blockchains are declining. 📉 Gas fees typically correlate with price.
Bitcoin’s average gas fee fell 24% overnight to $5.10. According to Ycharts, Bitcoin’s average transaction fee is 330% lower YoY. The second-largest cryptocurrency, Ethereum, also saw dips in fees. BitInfoCharts shows the average gas fee at $2.15, down from $69.92 on May 12 one day after Ethereum hit $4,164.
Fewer miners and participants on blockchains might benefit some users, but China’s crackdown means crypto lost most of its miners… and miners are necessary on networks like Bitcoin and Ethereum. 😬
If demand rises again without a spike in the number of miners, gas fees could soar to unprecedented levels. Hopefully China’s crypto miners just migrate somewhere else. 🙏