Ethereum Transaction Fees Have Been Rising Again Recently. Here's What Could Be Behind This Trend

On-chain data shows that Ethereum transaction fees have been rising again recently. Here's what could be behind this trend.

Ethereum transaction fees have been rising again recently, according to on-chain data. Here’s what could be driving this trend.

Ethereum Average Fees Have Seen A Notable Uptick Recently

In a recent insight post, on-chain analytics firm Santiment discussed how the Ethereum network has become more expensive to use. The metric in focus here is "Average Fees," which tracks the average fee that ETH users are currently attaching to their transactions.

The average fee that users are willing to pay depends on the level of activity the blockchain is experiencing. When there is a high volume of activity, transactions can get stuck for a long time, since ETH only has a limited capacity to handle transactions. So, users who want to beat the crowd pay a higher-than-average fee.

This user competition is what determines how high the average gets. When there is less activity on the network, users will pay the lowest amount possible, as there is not much incentive to pay a high fee.

Now, here’s a chart that shows the performance of Ethereum Average Fees over the last few months:

Ethereum Average Fees - Santiment

As the above chart highlights, the Ethereum Average Fee has been climbing recently, and it's currently at $3.2, which is the highest level since early August.

However, this previous spike in August, while sharp, lasted for a very short duration. From the chart, it’s visible that this previous spike coincided with the crash that the cryptocurrency experienced around that time. The surge in fees was hence a result of investors making panicked moves and being willing to pay a high price to get them done quickly.

Before this spike, the last time a sustained trend in fees was observed, similar to the recent one, was in late May. As such, the latest value of the metric is the highest it has been in four months.

Now, regarding what’s driving this latest trend, an obvious candidate would be the rally that the asset has enjoyed recently. Strong price action usually attracts attention, and the Average Fees tend to follow suit.

However, a closer look at the fee breakdown reveals that the regular Ethereum traders might not be the ones driving this increase.

As it turns out, Wrapped Ethereum (WETH) has been the token contributing the largest amount to network fees recently. According to Santiment:

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 a base asset.

ETH Price

At the moment, Ethereum is trading at around $2,700, showing a 5% increase over the last seven days.