The Boom of Ordinals on the Bitcoin Blockchain
Recently, there has been a surge in the creation of Ordinals on the Bitcoin blockchain. This trend is part of a larger boom happening in the crypto markets, which includes the recent case of Bonk. It appears that the overall market context is contributing to this phenomenon.
The Rise of Ordinals
Ordinals gained significant traction when they were introduced in May. They are a type of NFT on the Bitcoin blockchain, created through inscriptions. During their launch, Bitcoin transaction fees spiked from $2.5 to $30 within ten days in early May. Currently, average transaction fees have skyrocketed to over $37, possibly due to the higher market value of BTC paid as fees.
Data from Dune shows that the daily number of new Ordinals created is not higher than previous months. The recent boom may appear larger due to the increased market value of BTC. This current boom has been ongoing since the beginning of the month and seems longer than the one in May.
The Euphoria in Crypto Markets
When considering the recent Bonk boom and the current ACE boom, it suggests that there may be an excess of euphoria in the crypto markets. However, Bitcoin’s Crypto Fear & Greed Index has not exceeded 75, indicating a lack of excessive euphoria for Bitcoin specifically. This is curious considering Bitcoin’s price has risen by 54% in the last two months.
While enthusiasm may not have reached excessive levels for BTC, it appears to have spilled over into other areas of the crypto market. This indicates that sufficient enthusiasm exists elsewhere to generate excesses outside of Bitcoin.
The Increase in Bitcoin Network Fees
The boom of Ordinals is causing issues for Bitcoin users conducting transactions on the blockchain. Despite the availability of Lightning Network, which solves the fee problem by avoiding on-chain transactions, many people are not yet utilizing it.
In late October, average fees for on-chain Bitcoin transactions were less than $1.5. However, fees rose above $15 on November 9th and reached $37 recently. Miners now have the opportunity to earn more than 2 BTC in fees per block, sometimes surpassing their reward of 6.25 BTC.
Using Lightning Network for transactions of limited amounts is essential as it significantly reduces costs to below $1.
The Success and Speculation Surrounding Ordinals
As most Ordinals consist of text written on the Bitcoin blockchain, it is challenging to pinpoint their exact reason for success. Speculation is believed to be a significant factor, as the boom coincided with other speculative trends in the crypto markets. It may be a temporary mini-bubble similar to the one in May but lasting longer.
The current crypto market is more active than in May, which could explain the prolonged duration of this mini-bubble. The existence of this bubble may continue if a possible retracement of Bitcoin does not occur. However, it remains uncertain whether such a retracement will happen.
Hot Take: The Continued Boom of Ordinals and its Implications
The boom of Ordinals on the Bitcoin blockchain reflects the overall excitement and speculation present in the crypto markets. While these NFTs have gained popularity, they have also caused significant increases in transaction fees on the Bitcoin network.
This surge in Ordinals can be seen as a temporary phenomenon fueled by speculation and market enthusiasm. However, it remains to be seen whether this trend will subside or continue amidst potential fluctuations in Bitcoin’s price.
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