Bitcoin Trading and Withdrawals Decelerate due to Waves of Demand
As 2017 comes to a close, a large number of cryptocurrency traders are selling off in order to make their profits for the year. As a result, several exchanges including the popular Coinbase temporarily suspended trading and withdrawals while their systems tried to catch up with the demand. At press time, Coinbase is no longer suffering from any service outages or disruptions and everything appears to be back to normal.
An Exciting Year Comes to a Close
2017 proved to be a very exciting year for holders of bitcoin. An investment of just $5000 in January would’ve netted you more than $50,000 at the end of the year. As such, a large number of traders who made such profits are looking to cash in. This could be for tax reasons, for the purposes of buying holiday gifts, or any other number of reasons.
In a response to the selloff, the price of bitcoin and other digital assets dropped significantly before slowly recovering. As of today, they have not yet reached their previous highs and are unlikely to do so until at least early January.
The sharp demand that was hit by popular exchange Coinbase caused them to post a warning on their site saying that currently withdrawals were taking significantly longer times to confirm. This affected both bitcoin and ether, but did not appear to affect litecoin or bitcoin cash.
In August, it was suggested by Bitcoin developer David A. Harding that businesses could batch their transactions together to save block space and hence lower fees. While exchanges like Bitstamp and Kraken already do so, other large exchanges like Coinbase and Gemini have not implemented this procedure yet. Batching refers to the act of stringing several bitcoin transactions together in one; however, while improving the cost of a transaction it can adversely affect privacy:
“We see that combining 10 payments together is about 25 percent the byte size of 10 payments made separately, saving about 75 percent. Slightly more can be saved as the number of payments per transaction increases.“
While it will not completely solve the scaling problems in Bitcoin, batching is a useful first step for many businesses to reduce the load on the blockchain.
Crypto Growing Pains
2017 has been a very difficult year for bitcoin as it is facing a large amount of growing pains in regards to its block size, transaction fees, and overall transaction times. Ethereum had a much better year, however, with the deployment of Cryptokitties, the network was at times overwhelmed and saw transactions fees and confirmation times spike. Shapeshift suspended the trading of Ethereum and ERC-20 assets several times during the crisis. They are currently asking all customers to avoid transacting in bitcoin, especially for amounts under $250.
The network has adapted, and now transactions are largely back to normal. Bitcoin on the other hand has still been suffering from all-time high transaction fees. Popular multi-asset wallet Exodus says that in order to get a high-speed withdrawal, a fee of about $200 is required for any amount of bitcoin.
Bitcoin proponents argue that fee estimations of most wallets are severely broken and suggest using wallets where you can manually enter the number of satoshis per byte you want to use for your transaction (for example, GreenAddress, Mycelium or Samourai). By checking the lowest satoshi per byte transaction in the previous block and setting it slightly higher, you should be able to get your payment confirmed with a relatively low fee.
Even various assets that normally have very low transaction fees have seen increases. For example, Litecoin went from less than one cent per transaction earlier this year to now up to $0.60 each transaction. This increase largely came after the massive bull run which saw litecoin move from $50 to $350 in just five days. Following the drop that all assets saw, litecoin currently sits at about $225 or so.
Despite the drop, this is still a massive increase from where the currency was at the beginning of this year at just around four dollars each.