Ethereum Transaction Fees Hit May 2022 Highs, What This Means For ETH?

Ethereum transaction charges are as soon as once more hitting highs final seen since Could 2022. This improvement has raised issues in regards to the impression on the Ethereum community utilization and its native cryptocurrency, ETH.

Ethereum, the second-largest crypto by market capitalization, is likely one of the main decentralized finance (DeFi) and non-fungible tokens (NFTs) platforms. The community has been experiencing a surge in exercise because of the growing reputation of memecoins akin to PEPE, which has triggered charges to spike.

Rising Transaction Charges: A Trigger For Concern

On Could 2, the median common transaction charge on the Ethereum community soared to round 87 gwei, in accordance with Dune Analytics. This spike was primarily attributed to the elevated on-chain exercise surrounding memecoin buying and selling, in accordance with Hildobby, a pseudonymous knowledge researcher at VC agency Dragonfly.

Memecoins akin to Pepe the Frog-themed token have been having fun with a renaissance not too long ago, with the token worth hovering over 266 occasions in simply 4 days in April. The memecoin’s market cap rose to over $500 million this week earlier than crashing under $400 million once more.

Whereas this surge in activity might point out growing curiosity within the crypto market, it additionally highlights issues in regards to the community’s scalability and the impression of rising charges on customers. Excessive transaction charges can deter customers from interacting with decentralized purposes on the Ethereum community; because the charges enhance, smaller customers are priced out of the platform and its purposes. 

Notably, the rise in memecoin buying and selling exercise, which elevated the variety of transactions on the Ethereum community, resulting in a surge in charges, has additionally made decentralized exchanges (DEXs) on Ethereum expertise the very best stage of customers since 2021. 

Dune Analytics data reveals that Ethereum-based DEXs noticed a surge in quantity, with the overall buying and selling quantity on these platforms surpassing $63 billion in April alone. This represents a big enhance from March, when the overall buying and selling quantity was round $31 billion.

What This Means For ETH

It’s price noting that the rising transaction charges on the Ethereum community are seen as a drawback to the worth of ETH, as customers might search alternative blockchains with decrease transaction prices. An occasion of that is the growing curiosity in different L1 blockchains akin to Solana (SOL), Cardano (ADA), Fantom (FTM), and so forth.

Nonetheless, Ethereum co-founder Vitalik Buterin not too long ago prompt that the community might quickly scale up to 100,000 transactions per second. This might assist alleviate community scalability issues and cut back transaction charges.

Regardless, the elevated exercise could also be a constructive signal of rising curiosity within the crypto market; nevertheless it has an costly worth tagged. The rise in charges might discourage smaller transactions and result in a decline in demand for ETH. 

Wwith Ethereum’s scalability enhancements within the pipeline, it stays to be seen how the community will evolve within the coming months. In the meantime, ETH price has declined 0.4% after a possible surge to commerce above $2,000, final month.

ETH at present trades for $1.872 on the time of writing. ETH has a 24-low of $1,855 and a 24-high of $1,919, in accordance with knowledge from CoinMarketCap. Whatever the market decline, the asset’s buying and selling quantity has solely ranged between $8 billion and $9 billion prior to now two weeks.

Featured picture from Shutterstock, Chart from TradingView