On-chain data shows that Ethereum transaction fees have also increased recently. Here is what may be behind this trend.
Ethereum Currency Rate Has Registered A Significant Uptick Recently
In a new insight post, on-chain analytics company Santiment talked about how the Ethereum network has recently become expensive. The metric of interest here is “Average Fees,” which tracks the average fees that ETH users are currently attaching for their transfers.
How much money senders may be willing to pay comes down to the level of activity the blockchain can witness. During periods of high traffic, transfers may be temporarily delayed, as ETH has a limited capacity to handle transactions. Those who want to beat the crowd, thus, go with a higher than average salary.
This user competition determines how high the rating can be. With less activity on the network, senders will want the lowest price possible, as there is not much incentive to pay a higher fee.
Now, here is a chart showing the trend of Ethereum Average Payments over the past few months:
Looks like the value of the metric has been heading up in recent days | Source: Santiment
As seen above, Ethereum’s average price has recently risen and currently sits at $3.2, the highest level since early August. However, this previous spike in August, although large in scale, was short-lived.
From the chart, it can be seen that this previous gap coincided with the crash that the cryptocurrency saw at that time. Therefore, the rise in money is because investors have been panicking and willing to pay a lot of money to do it quickly.
Prior to this increase, the last time a sustained trend in payments like the recent one was seen was in late May. As such, the latest value of the metric was effectively the highest point in four months.
Now, as to what is behind this latest trend, the obvious reason would seem to be the commodity rally that you have recently enjoyed. Sharp price action attracts attention, so Average Fees usually increase.
However, the currency split data reveals that Ethereum’s common traders may not continue to rise.
The distribution of the ETH fees over the past week | Source: Santiment
As it turns out, Chained Ethereum (WETH) has just become the token that offers the largest contribution to network fees. As Santiment notes:
The dominance of WETH in fees indicates that merchants are using DeFi platforms more, likely to engage in fundraising, trading, and other financial activities that require WETH as the underlying asset.
Trading currency of ETH
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 from Dall-E, Santiment.net, chart from TradingView.com