NeuroInvest 3 minutes reading from Bitcoin

BREAKING: Mempool Reacts to BTC exchange outflows

How is the mempool reacting to BTC exchange outflows ?

Let's dive in!

🔸Brief mempool mechanics

🔸How this occurred?

🔸Effects on BTC ?

🧵Thread 1/x


Transactions made on the BTC network are not directly added to the blockchain

They are sent to a waiting room (mempool), run by individual nodes (a singularity on the bitcoin network)


Mempool: Unconfirmed Transactions Blockchain: Confirmed Packaged

These transactions are stored in this organized queue (mempool) until the process of auditing, validated, and broadcasted has occurred (processed by ea individual node)

💡There are 3 unique types of these nodes with various responsibilities: (Full, Light, Miner) 💡

What happened on Nov 14th:

We witnessed a high amount of network volume - traffic building up on-chain

This reaction occurred as we saw mass outflows off of exchanges.

Remember, every transaction must go through that screening process in order get classified (CONFIRMED)

During high amounts of congestion, the mempool stores these transaction until a miner picks it up and adds the block to the subsequent chain of blocks

How this effect's BTC?

When mempools get backlogs, during periods of heightened volumes, nodes will prioritize those with higher fees.

Hence, we can expect... 🔸Longer than AVG confirmation time 🔸Higher fees

💡The duration of this backlog depends the intersection between supply and demand

Other forward looking implications:

🔸The transpired events can also indicate strong participant conviction (BTC -> onchain)

🔸Reducing amount of liquid supply = reaching stronger long-term structural fundamentals

This post is based on this twitter thread.


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