The Crypto Comms #53; Storm in a teacup

Chris on Crypto
5 min readMay 9, 2023


Bitcoin layer one activity has maxed out again as adoption soars on a new use-case. Specifically, ordinal inscriptions are available on Bitcoin, but blockspace is limited. Their relative and probably fleeting success highlights the importance of decentralised L1 blockchains such as Litecoin, as well as L2 scaling solutions like the Lightning Network.

In this issue:

  • Bitcoin analysis
  • Ordinals congest mempool
  • Lightning Network, Litecoin network
  • Latest happenings
  • Listening material

Bitcoin analysis

  • Bitcoin/Dollar continued to struggle at the $30,000 level, eventually succumbing to sell pressure on Saturday. The pair is in a directionless bleed-chop or consolidation phase under a regime of negative funding rates for futures/perpetuals contracts.
Negative funding rates (shorts paying longs)
  • These rates are less consequential under a regime of relatively higher spot volumes.
  • A cluster of support rests at around the $24,000-$25,000 area. There is little evidence to suggest that a market collapse beyond this order bloc is likely.
  • That said, price closed below the 50-daily exponential moving average on Monday, opening the door for the market to test lower prices. The first area to look for a possible reversal is $26,500 (equal lows).
BTC/USD levels of interest
  • If sufficient buying interest materialises, a price-deviation might send the market in the other direction, potentially taking out illiquid weekend trading activity. Failed breakdowns tend to be rocket fuel for the opposite direction.
Exchange reserves drop over the weekend
  • Bitcoin exchange reserves fell markedly over the weekend, with 183,686 BTC being moved off centralised exchanges. The trend of removing liquidity from orderbooks has persisted without pause for over three years. Liquid bitcoin is drying up.

Ordinals congest mempool

The BRC-20 ordinals (NFT) craze went into high gear over the weekend, congesting the blockchain with up to 450,000 unconfirmed transactions stuck in the mempool (or should I say memepool). Some galaxy brains came out swinging saying the NFT craze is a denial-of-service attack against the BTC blockchain, when in fact, it’s just something new that the market is testing out.

Briefly, ordinals use Bitcoin’s UTXO (Unspent Transaction Output) model to add inscription data on the blockchain. The protocol launched in January, spawning BRC-20 tokens which are similar to Ethereum’s ERC-20 tokens. Litecoin also launched its own LRC-20 ordinals standard, which are mintable on Litescribe, tripling unique addresses to around 500,000 — more than Bitcoin.

BTC mempool congestion surpasses 406,900 TXs

While this sounds good on paper, decentralised layer one blockchains are generally inefficient by design. This excludes centralised databases like Solana, which is a company. But at 4MB per transaction block, there isn’t much space to go around on Bitcoin. On the upside, the frenzy raised miner fees to over $21 million (789.4 BTC), all the while creating massive network congestion.

At the time of writing, there are 406,911 unconfirmed transactions.

Lightning network, Litecoin network

As far as layer one blockchains are concerned, Litecoin is an obvious solution for the ordinal craze, and spillover from BTC will be picked up by Litecoin’s faster network. If layer one decentralisation lends value to ordinals, then a pristine L1 such as LTC is both desirable and available for usage.

However, layer two solutions are also available. The Lightning Network’s (LN) capacity is currently 5,456 BTC ($159 million) across ~74,000 unique channels connecting the network’s nodes. The network offsets traffic through transaction channels that use both on-chain and off-chain processing.

When channels are closed, transactions are bundled together and returned to Bitcoin’s mainnet for confirmation later. These transactions are practically instant with near-zero fees since there is no need to broadcast every transaction to miners (since they’re bundled). That said, LN’s network capacity will have to dramatically increase in order for ordinal adoption to continue. Centralised exchanges such as Bitfinex and Kraken already support the Lightning network along with many other exchanges. Binance, Coinbase and Bithumb do not support it, for some reason unknown even to the heavens above.

The LN network is available on both BTC and LTC.

Regardless, the ordinals craze is a sideshow at best, and pales in comparison to the ongoing drama that’s on display in legacy finance. The US banking crisis is leaving bodies everywhere, and thousands have yet to surface. As an anti-fragile asset, Bitcoin tends to emerge faster, better and stronger in such situations. Onwards.


Latest happenings

Listening material

Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.

Thank you for reading.

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Chris on Crypto

Journalist-turned crypto-writer & analyst; forging the narrative, stacking sats.