Data from the chain shows that Ethereum transaction costs have increased again recently. Here’s what could be behind this trend.
Average Ethereum rates have recently registered a notable increase
In a new insight afteron-chain analytics firm Santiment spoke about how the Ethereum network has become more expensive lately. The statistic of interest here is the “Average costs”, which tracks the average fees that ETH users currently attach to their transfers.
How much fees senders are willing to pay depends on the level of activity the blockchain witnesses. During times of high traffic, transfers may stall for a while as ETH has limited capacity to handle transactions. So those who want to beat the crowd opt for a higher than average rate.
This user competition determines how high the average would be. When there is little activity on the network, senders will opt for the cheapest amount possible because there is not much incentive to pay a high amount.
Here is a chart showing the trend in average Ethereum fees over the past few months:
Looks like the value of the metric has been heading up in recent days | Source: Santiment
As visible above, the Ethereum Average Fee has been rising lately and is currently at $3.2, the highest level since early August. However, this earlier peak in August, although large in magnitude, lasted for a very short time.
The graph shows that this previous peak coincided with the crash who had observed the cryptocurrency around that time. So the increase in fees was a result of investors making panic moves and being willing to pay high to get them done quickly.
Before this spike, the last time a sustained trend in reimbursements similar to those recently observed was in late May. As such, the metric’s latest value has actually been a four-month high.
As for what’s behind this latest trend, one obvious reason seems to be the rally the asset has recently undergone. Competitive price promotions attract attention, which generally increases average costs.
However, details of the fee breakdown show that regular Ethereum traders may not be providing the increase.
The distribution of the ETH fees over the past week | Source: Santiment
As it turns out, Wrapped Ethereum (WETH) has recently been the top contributing token to network costs. As Santiment notes:
WETH’s dominance in fee contributions indicates that traders are making heavy use of DeFi platforms and are likely to engage in liquidity pools, trading, and other financial activities that require WETH as a base asset.
ETH price
At the time of writing, Ethereum is hovering around $2,700, up 5% in 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