Bitcoin unconfirmed transactions hint at possible price drop
2017 was a historic year for Bitcoin and speculators; not just for speculators betting on its price but also in terms of its success. However, success did come with its own challenges as fees rose drastically along with unconfirmed transactions.
Mempool is where transactions on Bitcoin blockchains are sent if they aren’t confirmed. Transactions are then sorted based on the fees the sender is willing to pay. In 2017, the average transaction fees hit $56. The Bitcoin blockchain, visibly, had and has scalability issues, however, plenty second layer solutions have been developed since then. Regardless, the mempool spiked yet again during the recent flash crash.
However, a Twitter user with screen name, NunyaBizniz, posted a chart taking a look at mempool spikes and laying it over the price. In his tweet, it showed that mempool spikes were observed at turning points for price.
From the above, picture, there are a total of seven times when mempools spiked and each time it was a turning point for the price, i.e., the price collapsed. The most recent one was in June when the price of Bitcoin hit $13,800.
Since this point, the mempool spiked, yet again May 14, where the total unconfirmed transaction count hit 81,207, hence, an obvious interpretation here would be for the price to collapse.
The recent spike shies in comparison to the 2017 surge. Interestingly, the May spike in mempool was caused by exchange transfers and unlike 2017, this time around, Bitcoin has Lightning network, Liquid network, and SegWit enabled, all of which could easily reduce the network congestion.
Although it is best to stay skeptical about the connection between price tops and mempool spikes, the technical indicators for Bitcoin show that the price is due for a downtrend.