Crypto: Ethereum Fees Skyrocket… But User Activity Plummets Heavily!

As the crypto market continues to fascinate with its dynamism and unpredictability, Ethereum, the pillar of decentralized finance, finds itself at the heart of a new enigma. For several weeks, a strange dissonance has been settling within the network: transaction fees are exploding, with levels rarely seen since the switch to proof of stake, while the number of active accounts is plummeting to a historic low for the year.

A surge in transaction fees despite a decline in activity

At the beginning of September 2024, Ethereum saw its average transaction fees fall below the symbolic $1 mark for the first time since July 2020. However, within a few weeks, these fees skyrocketed. Indeed, on September 21, 2024, the seven-day moving average of fees reached $3.52, more than triple the $0.85 recorded at the beginning of the month. Such an increase coincides with a strengthening of Ethereum’s “burn,” which also exploded, going from 80.27 ETH to over 1,360 ETH in just three weeks, a 1600% jump. This situation is all the more surprising given that network activity seems to be slowing down.

The sudden increase is largely attributable to the increased gas consumption by certain highly active smart contracts on the network. Among these contracts are Uniswap, in both its original and V2 variants, as well as trading bots focused on Telegram, such as Maestro and Banana Gun. Ether transfers and crypto transactions related to stablecoins Tether (USDT) and USD Coin (USDC) are also among the main contributors to this rise in fees. Despite this increase in costs, network usage, measured by the number of active accounts, continues to decline.

A marked drop in active accounts: a warning signal?

While fees are rising, Ethereum is experiencing a significant drop in the number of active accounts. Indeed, on September 21, 2024, data shows that active accounts fell by 11% compared to the beginning of the month, with about 385,000 users, their lowest level since December 2023. This situation could reflect a lack of interest in Ethereum, given rising fees while overall network activity declines.

The decline in active accounts may also be explained by a decrease in revenues for Ethereum stakers. Indeed, they have seen daily earnings decline for several months. With increased competition from other blockchains and more cost-effective alternatives, Ethereum is forced to adopt new strategies to slow this decline and regain user engagement. The short-term outlook remains uncertain, especially as the general sentiment in the crypto market does not seem to favor Ethereum.

The rise in Ethereum transaction fees (combined with the drop in the number of active accounts) represents a pivotal period for the blockchain. While this situation could enhance profitability for some network participants, it may also hinder adoption by new users and encourage migration to competing solutions.