Cryptocurrency on-chain activity is on the rise, driven by an increase in transaction fees. According to data from IntoTheBlock on December 8, Bitcoin transaction fees have surged by more than 60%, and Ethereum’s “gas” fees have seen a nearly 50% climb in the past week.
Transaction fees for both Bitcoin and Ethereum have experienced double-digit increases.
This surge in activity can be attributed to various factors, with growing user interest and the ongoing bullish trend in the crypto market being the primary drivers. To illustrate, as of the current writing, Bitcoin and Ethereum prices are reaching 2023 highs, surpassing $43,500 and $2,300, respectively.
Despite these impressive gains, the crypto community anticipates further upward momentum in the coming weeks and months. This optimism is fueled in part by the expected influx of institutional capital, projected to be in the billions, into the crypto sphere.
According to data from IntoTheBlock, cumulative fees collected in Bitcoin for this week have reached $43.8 million, representing a 61% increase. Meanwhile, Ethereum has accumulated $83.3 million in fees.
Analyzing the historical trend of transaction fees, it becomes apparent that conducting transactions on Ethereum, despite its relatively high transaction processing speeds (TPS), tends to be more costly than on Bitcoin. This discrepancy can be attributed to Ethereum’s prominent role in decentralized finance (DeFi), non-fungible token (NFT) minting, and similar activities. Unlike Ethereum, Bitcoin operates primarily as a transactional layer and lacks inherent support for smart contracts.
Typically, an increase in on-chain transaction fees is considered bullish for the price, signaling the thriving nature of their respective ecosystems through growing adoption. As transaction fees escalate in the two leading blockchain ecosystems, there is a heightened interest from users to engage with the projects. Consequently, this heightened activity could contribute to supporting prices, as both BTC and ETH are utilized for paying transaction fees.
Can Bitcoin surpass its 2021 peak of $70,000?
With BTC surpassing $43,500 and ETH breaking the $2,300 mark, the potential for these cryptocurrencies to retest and exceed their previous all-time highs of $70,000 and $4,800, respectively, cannot be overlooked. The continuous bull market is a significant factor driving the surge in on-chain activity.
As the cryptocurrency market experiences an upswing, more individuals are seeking strategic positions with the hope of capitalizing on potential price increases. This surge, driven by a fear of missing out (FOMO), has led to elevated fees and prices.
Anticipation is building for increased demand in liquid and SEC-recognized digital assets, especially upon the Securities and Exchange Commission (SEC) granting approval for the first Bitcoin ETF. This derivative product is expected to provide institutions with a regulated avenue to confidently invest in Bitcoin.
The likelihood of the SEC endorsing this product has been on the rise since early Q4 2023, coinciding with a simultaneous increase in BTC and ETH prices. However, the market’s response to the approval of a spot Bitcoin ETF remains uncertain. Once the SEC gives the green light to a spot Bitcoin ETF, attention will shift to Ethereum, and speculation will arise regarding the potential approval of a similar solution by the regulatory agency.