On-chain data shows that the Ethereum transaction fee has remained low despite the recent price increase. Here’s what this may mean for the market.
Ethereum Fees Saw a Big Rise During Local Fund
According to the data of the on-chain analysis company Holy, the ETH transaction fee has dropped below $2 per transfer now. The relevant indicator here is “average fees”, which measure the total amount of fees (in USD) that investors need to attach to their Ethereum transaction in order for it to take place on the blockchain.
The value of this metric can fluctuate depending on the traffic the network is receiving. Generally, when there are a large number of transfers at the same time, the transactions may take longer to execute. So those who want their transfers to go through quickly during those times of congestion simply add a higher fee with their transactions to make sure the network prioritizes them.
On the other hand, when there aren’t many users making moves on-chain, average fees can plummet since there aren’t many investors competing with each other to get their transactions done faster anymore.
Due to this relationship, the average fee indicator can give an idea of whether or not the Ethereum network is experiencing a large amount of activity at the moment.
Now, here’s a chart showing the trend in average ETH fees over the past few months:
Looks like the value of the metric has observed some decline in recent days | Source: CryptoQuant
As shown in the chart above, Ethereum average fees had seen some pretty high values earlier in the month when the ETH price crashed and hit a local bottom.
During this spike, the indicator had peaked around $8.12, suggesting that the headlines were active at the time. This high network traffic naturally came in part from those who were applying selling pressure on the coin, hence the price drop.
Although, that was not all. The high fees would also have been the result of buyers rushing to buy the cryptocurrency at low prices, so the value of the asset shot up sharply soon after.
Ethereum has continued this new price surge recently, with the asset even managing to break above $1,800 briefly over the weekend, a level the coin had not previously reached since August 2022.
However, as this increase in the value of Ethereum has occurred, the average fees have only trended downward. Now, the value of the indicator has dropped to just $1.75, which implies that the network is not too active at the moment despite the rally.
Santiment believes this could be a good sign for ETH as it means the price would not encounter any notable transaction barriers currently, something that could help open the door to $2,000 for the asset.
ETH price
As of this writing, Ethereum is trading around $1,780, up 12% in the past week.
ETH seems to have shot up recently | Source: ETHUSD on TradingView
Featured Image by DrawKit Illustrations on Unsplash.com, Graphics by TradingView.com, Santiment.net
