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Home»ETHEREUM NEWS»Why are Ethereum fees rising again?
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Why are Ethereum fees rising again?

By Crypto FlexsSeptember 30, 20243 Mins Read
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Why are Ethereum fees rising again?
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On-chain data shows that Ethereum transaction fees are rising again recently. The reasons behind this trend are as follows:

Ethereum average fees have recently recorded a notable rise.

In a new insight post, on-chain analytics firm Santiment talked about how the Ethereum network has become more expensive recently. The metric of interest here is the “average fee” which tracks the average fee ETH users currently attach to their transfers.

The amount of fees a sender is willing to pay is determined by the level of activity the blockchain is witnessing. During periods of high traffic, transfers may be briefly interrupted as ETH has limited capacity to process transactions. Therefore, those who want to beat the crowd pay higher-than-average fees.

This user competition determines how high the average will go. Since there is little network activity, there is not much incentive to pay high fees, so senders end up choosing the cheapest amount possible.

Now here is a chart showing the Ethereum average fee trends over the past few months:

Looks like the value of the metric has been heading up in recent days | Source: Santiment

As you can see above, Ethereum average fees have been rising recently and are currently sitting at $3.2, the highest level since early August. But the previous August surge, although large, lasted only a short time.

Looking at the chart, we can see that the previous surge coincided with the slump the cryptocurrency was witnessing at the time. So the spike in fees was because investors were panicking and were willing to pay high fees to get it done quickly.

Prior to this spike, the last time we observed a consistent fee trend similar to recent fees was in late May. So the latest value for that indicator was actually the highest in four months.

Now, it seems like there is a clear reason behind this latest trend and the rally the asset has enjoyed recently. Because drastic price action attracts attention, average fees typically go up.

However, according to the fee breakdown, the average Ethereum trader may not be able to push for a fee increase.

Ethereum fee distribution

The distribution of the ETH fees over the past week | Source: Santiment

As it turns out, Wrapped Ethereum (WETH) has been the largest contributor to network fees recently. As Santiment mentioned:

WETH’s dominance in fee contributions indicates that traders are heavily utilizing DeFi platforms and are likely to engage in liquidity pools, trading, and other financial activities that require WETH as the underlying asset.

ETH price

As of this writing, Ethereum is trading at around $2,700, up 5% over the past seven days.

Ethereum price chart

The price of the coin seems to have been consolidating over the last few days | Source: ETHUSDT on TradingView

Dall-E, featured image from Santiment.net, chart from TradingView.com

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