Bitcoin Transaction Fees Plunge While Institutions Add Crypto to their Portfolios

This week the price of Bitcoin (BTC) moved up to test the $10,000 mark before the market started once again dropping, entering a downward trend that saw the price drop below $9,000. At press time, BTC has climbed above the $9,000 mark once again to trade at $9,100. 

Ether (ETH), the second-largest cryptocurrency by market capitalization, has moved in a similar pattern, testing the $250 mark earlier in the week before entering a downward trend that has seen it move back to $225.

Average transaction fees on the Bitcoin network have plunged after May’s halving hype saw them hit a $6.6 high, as users were likely moving their funds in preparation for the block reward halving, which cut BTC’s inflation rate in half.  Available data from BitInfoCharts shows that the average transaction fee is now below $1 at $0.55, as fees dropped over 90% in little over a month.

At the beginning of the year, it’s worth noting, Bitcoin transaction fees were below $0.3 on average. Fees on the cryptocurrency’s network go up when there are more transactions to process, as competition for available block space heats up. At their all-time high, BTC transaction fees were at $55.

Although competition for available block space has been dropping, institutional investors’ interest in the nascent space is not. A survey conducted by Fidelity Digital Assets of more than 800 institutional investors, conducted between November 2019 and March 2020, found that more than one third already hold digital assets in some capacity, while nearly two-thirds said they thought there was a place for them in their portfolios.

Of the institutional investors currently holding cryptocurrencies in their portfolio, over a quarter had exposure to Bitcoin, while 11% had exposure to Ether. Over 60% revealed they buy cryptoassets directly, and don’t use a third-party broker or custodian. Surveyed investors cited various advantages of holding cryptoassets in their portfolios, including liquidity, low transportation, and transaction costs. They also cited concerns such as price volatility and potential market manipulation.

Fidelity Digital Assets president Tom Jessop said in a statement:

  “Investor concerns are largely focused on issues that will resolve themselves as the market infrastructure evolves. We’re proud to be one of many service providers actively driving that evolution for the benefit of the ecosystem and traditional investors alike.”

Documents filed with the U.S. Securities and Exchange Commission (SEC) reveal that Three Arrows Capital, a cryptocurrency investment fund based in Singapore, has been heavily investing in BTC using one of Wall Street’s go-to brokers for cryptocurrencies, Grayscale Investments.

The document reveals Three Arrows Capital has purchased roughly 6% of the outstanding shares in Grayscale’s Bitcoin Investment Trust, equal to roughly 20,000 BTC. In total Three Arrows Capital custodies 360,000 bitcoin for its clients. The documents come amid reports from TechCrunch founder Michael Arrington that the Singapore-based fund negotiated a warrant for a 10% stake in leading Bitcoin options trading platform Deribit.

Demand may continue to rise as the cryptocurrency space will soon be on the silver screen. The Winklevoss twins, Cameron and Tyler, are reportedly working with independent content creation company Stampede Ventures to produce a feature film adaption of the 2019 book “Bitcoin Billionaires” by Ben Mezrich.

The book goes into the Twins’ lives after a legal battle with Facebook’s Mark Zuckerberg, and details how they discovered bitcoin and invested in the new asset. Mezrich’s first book about the Winklevoss twins, “The Accidental Billionaires” was adapted by Columbia Pictures for the 2010 David Fincher film “The Social Network.” Mezrich has also written the book that led to the movie “21.”

Hackers Blackmail Crypto Exchange

Several mysterious Ethereum transactions baffled the cryptocurrency community this week, as they included millions of dollars worth of gas fees, and in one case, these fees were used to move only $130 worth of ETH. These transactions were initially believed to be part of a money laundering scheme, but a report published by Chiannews pointed to a blackmail attempt.

According to the report, which cites blockchain analysis firm PeckShield, hackers managed to get access to the wallet of an unnamed crypto trading platform but were not able to withdraw the funds directly to their accounts over multi-sig protections. They were, however, able to send funds to whitelisted addresses.

To blackmail the exchange into paying them a ransom, the report claims that the jackets started sending relatively small transactions to these addresses with millions being burned in transaction fees, threatening to empty the exchange’s wallet if they did not pay a ransom.

SparkPool, a mining pool that found the block that contained one of these transactions, froze the funds in an attempt to negotiate with the entity behind the transaction.