On-chain data shows that ethereum transaction fees have recently increased again. Here's what could be behind this trend.
ethereum Average Fees Have Recorded a Notable Increase Recently
In a new vision ethereum-fees-are-creeping-up-8144?fpr=twitter” target=”_blank” rel=”noopener nofollow”>mailOn-chain analytics firm Santiment talked about how the ethereum network has become more expensive recently. The metric of interest here is “Average Fees,” which tracks the average fees that eth users currently apply to their transfers.
The amount of fees that senders might be willing to pay depends on the level of activity the blockchain is witnessing. At times of high traffic, transfers may be blocked for a while as eth only has a limited capacity to handle transactions. Those looking to beat the crowd, therefore, opt for an above-average rate.
This user competition is what determines how high the average would go. With little activity on the network, senders will opt for the cheapest amount possible, as there is not much incentive to pay a high fee.
Now, here is a chart showing the trend in average ethereum fees over the past few months:
<img data-recalc-dims="1" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/09/Ethereum-fees-are-rising-again-what-is-driving-this.png" alt="Average ethereum Fees” width=”3010″ height=”1695″/>
Looks like the value of the metric has been heading up in recent days | Source: ethereum-fees-are-creeping-up-8144?fpr=twitter" target="_blank" rel="noopener nofollow">Santiment
As you can see above, the average ethereum fee has been rising recently and currently sits at $3.2, the highest level since early August. However, this previous August rally, although large in scale, was very short-lived.
From the chart, you can see that this previous peak coincided with the decline that the cryptocurrency had seen at that time. Therefore, the increase in fees was because investors had been taking panic measures and were willing to pay a lot to do them quickly.
Prior to this spike, the last time a sustained trend in commissions similar to the recent one was seen was in late May. As such, the metric's latest value has effectively been the highest point in four months.
Now, as for what's behind this latest trend, one obvious reason would seem to be the rally the asset has enjoyed recently. Strong price action attracts attention, so average rates generally increase.
However, details of the fee breakdown reveal that normal ethereum traders may not be driving the increase.
<img data-recalc-dims="1" loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/09/1727528788_257_Ethereum-fees-are-rising-again-what-is-driving-this.png" alt="ethereum Fee Distribution” width=”2769″ height=”1593″/>
The distribution of the eth fees over the past week | Source: ethereum-fees-are-creeping-up-8144?fpr=twitter" target="_blank" rel="noopener nofollow">Santiment
It turns out that Wrapped ethereum (WETH) has recently been the token providing the largest contribution to network fees. As Santiment points out:
The dominance of WETH in fee contributions indicates that traders are heavily utilizing DeFi platforms, likely engaging in liquidity pools, trading, and other financial activities that require WETH as the base asset.
eth Price
At the time of writing, ethereum is trading around $2,700, up 5% over the last seven days.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/ME1uRPkT/” alt=”ethereum price chart” width=”1534″ height=”852″/>
The price of the coin seems to have been consolidating over the last few days | Source: ETHUSDT on TradingView
Dall-E Featured Image, Santiment.net, TradingView.com Chart
