On-chain data shows that Ethereum transaction fees have risen again recently. Here’s what could be behind this trend.
Ethereum’s average fees have been on the rise recently
In a new vision mailon-chain analytics company Santiment talked about how the Ethereum network has recently become more expensive. The metric of interest here is “Average Fees,” which tracks the average fees that ETH users are currently attaching to their transfers.
The amount of fees senders may be willing to pay depends on the level of activity the blockchain is experiencing. During times of high traffic, transfers can be disrupted for a period of time, as ETH only has a limited capacity to handle transactions. Those looking to beat the crowds go for higher-than-average fees.
It is this user competition that governs how high the average can go. With little activity on the network, senders will choose the cheapest amount possible, as there is little incentive to pay high fees.
Now, here’s a chart showing the trend in average Ethereum fees over the past few months:
Looks like the value of the metric has been heading up in recent days | Source: Santiment
As shown above, the average Ethereum fee has risen recently and currently stands at $3.2, the highest level since early August. However, this previous August surge, although huge, lasted very briefly.
From the chart, it appears that this previous rise coincided with the collapse that the cryptocurrency observed at the time. Thus, the high fees were due to investors making panicky moves and were willing to pay high amounts to get it done quickly.
Prior to this spike, the last time a continuing trend in charges similar to the recent one was observed was in late May. As such, the last value of the measure was the highest point in four months.
Now, as for what is behind this latest trend, the obvious reason seems to be the rally that the asset has enjoyed recently. Sharp price movement attracts attention, so average fees generally rise.
However, a breakdown of the fee details reveals that regular Ethereum traders may not pay this increase.
The distribution of the ETH fees over the past week | Source: Santiment
As it turns out, Wrapped Ethereum (WETH) has recently been the token making the largest contribution to network fees. As Santiment notes:
WETH’s dominance in fee contributions indicates that traders make heavy use of DeFi platforms, and are likely to participate in liquidity pools, trading, and other financial activities that require WETH as an underlying asset.
Ethereum price
At the time of writing, Ethereum’s price is trading around $2,700, up 5% over the past seven days.
The price of the coin seems to have been consolidating over the last few days | Source: ETHUSDT on TradingView
Featured image from Dall-E, Santiment.net, chart from TradingView.com