The Bitcoin Fad Is Over

Mar. 22, 2018 4:45 PM ETBitcoin USD (BTC-USD)GBTC, COIN-OLD61 Comments
Skyward Investments profile picture
Skyward Investments


  • The Bitcoin bandwagon is falling apart.
  • Failure to cut out middleman.
  • Failure to serve those who could benefit most.
  • Current investors fading away as regulation and taxes kick in.

Failure to Get Rid of Middleman

Bitcoin's creator, Satoshi Nakamoto, pioneered Bitcoin as a way to get rid of the middleman (financial institutions) in order to cut out transaction costs, and make smaller transactions cheaper. Unfortunately, Bitcoin has totally failed to serve its purpose in this regard. The cryptocurrency is considered "digital gold," and has regressive transaction fees that make smaller purchases more expensive compared to credit card.

Take a look at the processing fees of these popular credit card companies:

(Source: Value Penguin)

The overall average fee is 2.23% per transaction in the United States. Most transaction fees are baked into product prices for merchants, but sometimes when your bill is too small, merchants charge you a small fee if you use a card. So you are in fact indirectly paying to use a card. Now, since Bitcoin was intended as a payment solution for small transactions, imagine you spend $20 at the grocery store using a credit card: that is $0.45 for the transaction.

According to BitInfoCharts, the average Bitcoin transaction fee was $1.43 on 03/21/18.

(Source: BitInfoCharts)

Looking at the average transaction value on 03/21/18, at $43,000, Bitcoin's transaction fee percentage looks stellar compared to credit cards at approximately ($1.43 / $43,000 =) 0.003% versus the credit card average of 2.23%.


(Source: BitInfoCharts)

However, Bitcoin transaction fees are not proportional to how much you spend, they are proportional to transaction volume on the network. Take a look at the transaction volume graph below.

(Source: BitInfoCharts)

There isn't always a 1-to-1 correlation between the transaction volume graph and the average transaction value graph, but if you look at March 17th, you can see that when volume is low, transaction fees are lower. As you move rightwards, volume increases in tandem with transaction fees. For anyone paying with BTC, this makes transaction fees

This article was written by

Skyward Investments profile picture
Investor with a focus on technology stocks.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (61)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.