There is an increase in on-chain crypto activity if transaction fees increase. According to IntoTheBlock data On December 8, bitcoin transaction fees increased by more than 60%, while “gas” on ethereum increased by almost 50% last week.
bitcoin and ethereum transaction fees rise by double digits
This increase in activity can be attributed to multiple factors, primarily growing user interest and the current cryptocurrency bull market. To illustrate, bitcoin and ethereum prices are trending towards 2023 highs above $43,500 and $2,300 at the time of writing.
Still, the crypto community expects these coins to extend their gains in the coming weeks and months, in part due to the expected institutional capital, projected in the billions, flowing into the sphere.
According to data from IntoTheBlock, the cumulative fees collected in bitcoin this week amount to $43.8 million, an increase of 61%. On the other hand, ethereum has accumulated $83.3 million in fees.
Looking at the historical trend of transaction fees, transacting on ethereum, despite its relatively high transaction processing speeds (TPS), is more expensive than bitcoin. This may be due to ethereum's role in decentralized finance (DeFi), non-fungible token (nft) minting, and more. bitcoin is a transactional layer and does not inherently support smart contracts.
Generally, rising on-chain transaction fees are bullish for the price and indicate that their respective ecosystem is thriving due to increased adoption. With transaction fees increasing in the two leading blockchain ecosystems, more people want to interact with the project. This could subsequently support prices as btc or eth are used to pay transaction fees.
Will btc surpass 2021 highs of $70,000?
With btc currently trading above $43,500 and eth recently surpassing $2,300, the possibility of these coins retesting and surpassing their all-time highs of $70,000 and $4,800, respectively, cannot be ruled out. One of the key drivers of the increase in on-chain activity is the current bull market.
With the rise of cryptocurrencies, more people are looking to position themselves, hoping to benefit from further price appreciation. This wave of fear of missing out (FOMO) has driven higher fees and prices.
Demand for liquid, SEC-recognized digital assets will likely increase once the Securities and Exchange Commission (SEC) goes ahead and authorizes the first bitcoin ETF. This derivative product will allow institutions to invest in bitcoin with confidence through a regulated solution.
As the chances of the SEC approving this product increased from the beginning of Q4 2023, the prices of btc and eth began to rise in sync. Still, it remains to be seen how prices will react once the bitcoin spot ETF is approved. Once the SEC gives the green light to a spot bitcoin ETF, the cryptocurrency market will begin analyzing ethereum and whether the agency will approve a similar solution.
Featured image from Canva, TradingView chart