Recent on-chain data indicates that Ethereum transaction fees have seen an uptick once again. Here’s a look at the factors contributing to this trend.
Recent Jump in Ethereum Average Fees
A recent post by the on-chain analytics firm Santiment highlights that the Ethereum network has recently become more expensive for users. This increase is primarily reflected in the “Average Fees” metric, which tracks the average fees that ETH users attach to their transactions.
The fees that senders may opt to pay are influenced by the level of activity on the blockchain. During periods of high traffic, transactions can get delayed since ETH has a limited transaction capacity. To outpace the crowd, users tend to attach a fee higher than the average.
This competition among users dictates how high the average fee rises. When activity on the network is low, senders are inclined to choose the lowest fee possible, as there is little motivation to pay a higher amount.
Below is a chart illustrating the trend of Ethereum Average Fees over the past few months:
It appears the metric has seen an increase in recent days | Source: Santiment
As shown in the chart, the Ethereum Average Fee has been on the rise and is currently at $3.2, marking its highest level since early August. However, the previous spike in August, despite its scale, was short-lived.
The chart suggests that this previous fee spike coincided with the cryptocurrency market’s downturn at that time. Consequently, the surge in fees stemmed from investors making panic-driven moves, willing to pay more for quicker transactions.
Prior to this spike, the last occurrence of a sustained trend in fees, similar to the current one, was noted in late May. Thus, the latest fee value stands as the highest in four months.
The underlying reason for this recent trend can be attributed to the recent asset rally. Sharp price movements tend to garner attention, generally leading to an increase in Average Fees.
However, a detailed breakdown of the fees suggests that the usual Ethereum traders may not be the ones driving this increase.
The distribution of ETH fees over the past week | Source: Santiment
Interestingly, Wrapped Ethereum (WETH) has recently emerged as the token contributing the most to network fees. As noted by Santiment:
The prominence of WETH in fee contributions suggests that traders are increasingly utilizing DeFi platforms, likely partaking in liquidity pools, trading, and other financial operations requiring WETH as a cornerstone asset.
ETH Price
As of this writing, Ethereum is trading around $2,700, reflecting a 5% increase over the past week.
The coin's price appears to have been consolidating over recent days | Source: ETHUSDT on TradingView
Image credited to Dall-E, information from Santiment.net, chart from TradingView.com
