On-chain data shows that Ethereum transaction fees have increased again recently. Here’s what could be behind this trend.
Ethereum average fees have seen a notable rise recently
In a new analysis article, on-chain analytics firm Santiment explained how the Ethereum network has recently become more expensive. The interesting metric here is “Average Fees,” which tracks the average fees ETH users currently attach to their transfers.
The amount of fees senders might be willing to pay depends on the level of activity the blockchain witnesses. During times of high traffic, transfers may get stuck for a while because ETH only has limited capacity to handle transactions. Those looking to beat the crowds therefore opt for above-average fees.
This competition between users is what determines the level of the average. With little activity on the network, shippers opt for the cheapest amount possible because there is no real incentive to pay high fees.
Now here is a chart that shows the trend of Ethereum’s average fees over the past few months:
Looks like the value of the metric has been heading up in recent days | Source: Santiment
As can be seen above, Ethereum’s average fees have been increasing recently and currently sit at $3.2, the highest level since early August. However, this previous increase in August, although large, lasted very briefly.
From the chart, it is visible that this previous peak had coincided with the crash that the cryptocurrency had seen at that time. Thus, the rise in fees was due to the fact that investors had taken panic actions and were willing to pay a lot to achieve them quickly.
Prior to this spike, the last time a sustained fee trend similar to the recent one was seen was in late May. As such, the metric’s latest value was effectively the highest point in four months.
As for what’s behind this latest trend, one obvious reason seems to be the rally the asset has enjoyed recently. A strong price movement attracts attention, so average fees usually increase.
However, the fee breakdown details reveal that normal Ethereum traders might not be behind the increase.
The distribution of the ETH fees over the past week | Source: Santiment
It turns out that Wrapped Ethereum (WETH) has recently been the largest contributing token to network fees. As Santiment notes:
WETH’s dominance in fee contributions indicates that traders are heavily using DeFi platforms, likely engaging in liquidity pools, trades, and other financial activities that require WETH as a base asset.
ETH Price
At the time of writing, Ethereum is floating 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 of Dall-E, Santiment.net, chart from TradingView.com
