Bitcoin Network Fees Exceed the Price of a Big Mac Amid Price Rally

As Bitcoin’s (BTC) value experienced an upswing in October, interest from investors and cryptocurrency traders has soared, leading to heightened activity and consequently spiking the transaction fees on the Bitcoin Network above the cost of a widely recognized fast-food staple, the Big Mac.

Data sourced from mempool.space on November 7 revealed the average transaction costs on the Bitcoin Network over the past 144 blocks, equivalent to a 24-hour span.

Users have been paying an average of 0.00017510 BTC ($6.08) per transaction and 0.5796 BTC ($20,131) for each block processed. Over the noted period, miners have amassed 983.46 BTC in rewards, which totals around $34.16 million.

The average cost per Bitcoin transaction has notably eclipsed the average price of a Big Mac in the U.S., which stood at $5.58 in July 2023, as per The Economist’s Big Mac Index.

What’s Driving Up Bitcoin Network Fees?

The Bitcoin blockchain’s limited block space creates a bottleneck, with only so many transactions fitting into the next block. When network activity spikes, the competition for this space drives up the fees.

In essence, users bid against each other for priority processing, with those willing to pay more jumping ahead in the queue of pending transactions. High-stakes situations often lead to a fee increase as users compete to expedite their transactions, especially during market price rallies or sell-offs.

The last instance when Bitcoin transaction fees reached the price of a Big Mac was on June 7, recovering from a significant fee spike on May 8, according to BitInfoCharts data. Previously, surpassing the “Big Mac price” was an indicator for such surges.

Understanding the Big Mac Index

Introduced by The Economist in 1986, the Big Mac Index applies the principle of purchasing-power parity (PPP) to gauge the relative value of global currencies using the price of a Big Mac as a benchmark.

“It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries,” explained The Economist.

In relation to Bitcoin, the Big Mac Index serves as a unique metric of the network’s accessibility. Given Bitcoin’s aspiration to become a universal currency, the comparison to the Big Mac underscores the network’s affordability across diverse economic landscapes.

The prohibitive costs could deter BTC demand for users prioritizing transactional use over investment, leading them to seek more cost-effective networks or layer-2 solutions like the Lightning Network.

It should be noted that during periods of high fees, utilizing the Lightning Network carries the risk of having one’s BTC tied up due to prohibitive channel closure costs. Should demand for block space persist, users may find themselves facing increasingly unaffordable transaction fees.