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Bitcoin Network Clears Congestion After Bullish Rally

The Bitcoin network has seen a significant improvement in its performance and efficiency after a period of prolonged congestion that lasted from December 2023 to January 2024. According to data from Glassnode, a platform that provides analytics and insights on the Bitcoin ecosystem, the mempool, a holding area for transactions broadcast to the network but not yet included in a block, has cleared substantially, indicating a reduction in network demand and transaction fees.

The mempool is a useful indicator of the state of the Bitcoin network, as it reflects the level of network activity, user engagement, and block space competition. Analyzing the mempool can provide insight into network congestion, transaction demand, and fee trends, as well as the impact of these factors on Bitcoin’s price and adoption.

Graph showing the total number of transactions waiting in the Bitcoin mempool from Nov. 25, 2023, to Feb. 21, 2024 | Source: Glassnode

During the final months of 2023 and the early weeks of 2024, the Bitcoin network experienced significant congestion, as evidenced by the swelling size of the mempool. In mid-December, the mempool contained 117,813 transactions waiting to be processed, and transaction fees totaling 50.9 BTC. This congestion signaled a high demand for block space and highlighted the network’s challenges in accommodating surging transaction volumes.

Graph showing the total number of fees in the Bitcoin mempool from Nov. 25, 2023, to Feb. 21, 2024 | Source: Glassnode

By the end of December, the situation intensified, with the mempool size escalating to 194,374 transactions, indicating a peak in network activity and user engagement. This congestion had little impact on Bitcoin’s price, which traded at around $42,000 for the better part of December. The persistence of high transaction counts and fees into early January, with the mempool harboring 64,664 transactions and 32.7 BTC in fees on the first day of the year, underscored the network’s strain under the weight of unprocessed transactions.

The total size of transactions awaiting confirmation in the mempool further ballooned to 106.369 million bytes, peaking at 139.457 million by late January, reflecting a backlog of transactions and an increase in the complexity or size of the transactions. The turning point for the prolonged period of congestion came in February. By Feb. 21, the mempool cleared significantly, with the total transaction fees dropping to 8.3 BTC and the number of waiting transactions reduced to 68,433. The total size of transactions in the mempool also decreased to 90.439 million bytes, indicating a significant alleviation of network congestion.

This period of reduced congestion followed Bitcoin’s bullish rally, which saw it climb over $52,000 and then find stability at the $51,800 level. The rise in Bitcoin’s price may have contributed to the decrease in network demand, as some users may have opted to hold their coins rather than transact them, or may have switched to other platforms or services that offer lower fees or faster confirmations. Alternatively, the decrease in network demand may have been a result of a natural fluctuation in user behavior, or a reflection of the network’s ability to adapt and optimize its performance over time.

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