How the Bull Bitcoin Fee Multiple can help you manage Bitcoin network fees
AnnouncementNews

5 mins

4 months ago

Francis Pouliot
Francis Pouliot

CEO

How the Bull Bitcoin Fee Multiple can help you manage Bitcoin network fees

We created an indicator which shows clearly if the current Bitcoin Network fees are high or low relative to the average of the past year and the past month. It's similar to the Mayer Multiple, but for fees instead of price. This tool is also available via API, for apps that want to automate tasks or send notifications based on the network fee levels. 

feemultiple.bullbitcoin.com

How can one tell if the current Bitcoin fees are high, or low? This is an important question, because many Bitcoin management operations that are not “time sensitive” such as coinjoin, utxo consolidation and Lightning Network channel management should be avoided when fees are high, and should be encouraged when fees are low. 

Whether current fees are low or high is of course relative, not absolute. For example, if the average feerate needed for a transaction to be confirmed within an hour has been 200 sat/vbyte for the past 6 months, a sudden drop in the feerate to 30 sat/byte would be a great time to perform a UTXO consolidation. Similarly, if the feerate has been 3 sat/vbyte for an extended period, and there is an increase to 30 sat/vbyte, it might not be the best time to coinjoin.

Just like the Bitcoin price, it is impossible to “time the market” with Bitcoin fees. One may be tempted to wait for a drop in fees before conjoining or consolidating UTXOs and find himself watching the fees rise and rise for months, feeling foolish for not having taken advantage of low transaction fees when they had the chance.

However, the Bitcoin network fee dynamics are influenced by many factors (another longer blog post is needed to go into details). Suffice to say that even in a sustained high fee environment, it is reasonable to expect that there will be a moment's respite in fees and it can be a good strategy to keep an eye on the fees and wait for a “dip” to consolidate utxos or coinjoin.

This is the reason why we developed the Bull Bitcoin Fee Multiple, a simple technical indicator which can help people assess whether current fees are low or high.

We offer two indicators:

  1. 365 days: if you have a longer time horizon and you really want to have best bang for your buck 

  2. 30 days: if you are more in a hurry but you still don't want to get rekt by high fees

Fundamentally, our indicator divides the current feerate by its moving average, and then expresses how far this ratio is from its historical mean, therefore highlighting periods of relatively low/high fees.

How to use the Bull Bitcoin fee multiple?

It's simple: the lower the value, the better time it is to make Bitcoin transactions

Depending on your time preference, you may want to wait for the multiple to be lower to make transactions that are non-urgent. For example, consolidating your utxos or conjoining your bitcoins.

Historical data charts

We provide two useful charts which display the evolution of moving averages for Bitcoin network fee rates, as well the Bull Bitcoin fee multiple itself. This can help the user visualize at which point we currently are within a “feerate cycle” and what the current trend might be.

Human readable labels

The labels are here to help make a more informed decision on when it is a good time to make Bitcoin transactions. We have 10 labels which correspond to a decile within the distribution of the multiple 

  1. Fees are at extremely low: the multiple has been higher 90% of the time or more 

  2. Fees are very low: the multiple has been higher 80% to 90% of the time 

  3. Fees are low: the multiple has been higher 70% to 80% of the time 

  4. Fees are average-low: the multiple has been higher 60% to 70% of the time 

  5. Fees average: the multiple has been higher 50% to 60% of the time 

  6. Fees are average-high: the multiple has been higher 40% to 50% of the time 

  7. Fees are high: the multiple has been higher 30% to 40% of the time 

  8. Fees are very high: the multiple has been higher 20% to 30% of the time 

  9. Fees are extremely high: the multiple has been higher 10% to 20% of the time 

  10. Warning: fees are at their highest: the multiple has been higher 0% to 10% of the time 

What is the difference between 365 days and 30 days?

These are the timeframe for which the moving average of the past fees is calculated. 

If the value is lower for 365 days than for 30 days, it means that the current fees are low compared to the past year but aren't as low when compared to the past 30 days.

If the value is higher for 365 days and lower for 30 days, it means that the fees are still higher relative to the past year but there is a dip in the fees compared to the last month. 

If you are in a hurry to make a Bitcoin transaction, you can look at the 30-day value, but if you are not in a rush, you could wait for a low 365-day value.

What is the data source?

We use the mempool.space fee estimates for the “high priority” setting, which means essentially that the fees would likely lead to a transaction being included in 1-2 blocks. Historical data was taken from archives collected by txstats.com and current data (March 2024 onward) is taken directly from the mempool API. 

Further development: programmability 

Once we have a metric that can determine whether current fees are high or low relative to the past, it becomes easier to automate fee-efficient transactions. 

For example, a Bitcoin Wallet could turn on “auto-consolidation mode” when the fees are low (for example when the multiple is in the lowest 20% percentile). The wallet would use all available utxos in the wallet when making transactions, which would create utxo consolidation transactions for the user as the user makes regular Bitcoin payments. The user doesn't need to know what utxo consolidation is, it happens automatically! This could also be applied to Coinjoin, of Lightning Network channel management. Software that usually creates Bitcoin automatically regardless of fees could be programmed to hold off on making certain transactions if the fees are too high. 

The Bull Bitcoin fee multiple is available via API here: https://fees.bullbitcoin.com/api

Concluding thoughts 

As bitcoin builders, we cannot control the Bitcoin fee market, as it is a completely unregulated free market. However, there are only a few things we can do to help users:

  1. Develop alternative payment networks outside of the Bitcoin main chain (Lightning, Liquid, ecash, etc.)

  2. Better fee estimation and transaction tools to make sure our users do not overpay the fees 

  3. Create more efficient Bitcoin transactions that require less space on the blockchain 

  4. Provide analytical tools to users to help them time their transactions.

Bull Bitcoin is committed to working on all these solutions, because we strongly believe in Bitcoin's value proposition as a medium-of-exchange. Stay tuned for further articles showcasing open-source software and policies we put in place to incrementally make Bitcoin a better and cheaper payment method!

Related Posts

Learn more from the following articles

Bull Bitcoin Partners with Bitcoin Mentor for Enhanced Bitcoin Education and Integration
AnnouncementLearningbitcoinsupport.com (FR)

2 mins

21 days ago

Bull Bitcoin Partners with Bitcoin Mentor for Enhanced Bitcoin Education and Integration

Article Card Excerpt: Bull Bitcoin and Bitcoin Mentor Announce Strategic Partnership Bull Bitcoin, Canada's premier Bitcoin-only exchange, partners with Bitcoin Mentor to provide users with expert Bitcoin education and secure self-custody guidance. This collaboration aims to enhance the Bitcoin experience for all users through integrated support and personalized mentorship.

Mathieu Bussière
Mathieu Bussière

COO

The Hard Path
OpinionScaling Bitcoin

6 mins

2 months ago

The Hard Path

Bull Bitcoin takes the hard path to uphold Bitcoin's true values. Rejecting easy profits from custodial wallets, shitcoins, and NFTs, we focus on creating sovereign individuals through noncustodial services. We build open-source software and support local Bitcoin economies. Despite challenges, we maintain a steadfast commitment to Bitcoin's mission of decentralization, privacy, and self-custody, striving for long-term success and integrity.

Francis Pouliot
Francis Pouliot

CEO

A Primer on UTXOs
LearningFees

5 mins

2 months ago

A Primer on UTXOs

The fundamental elements of Bitcoin’s accounting system are transactions with inputs, outputs, and amounts (in satoshis). The input is either a coinbase transaction (newly mined bitcoin), or the output of a prior transaction which hasn’t been spent already, called an Unspent Transaction Output (UTXO). In this article, Theo Mogenet walks us through the structure of a Bitcoin transaction, the associated fees and how to consolidate your UTXOs.

Théo M
Théo M

Europe GM, Bull Bitcoin

EXCHANGE
BuySellFeaturesRates & Fees
SELF-CUSTODY
NEW
Self-custody SupportShop PackagesBuy for a friendDIY