There is a spike in crypto on-chain activity if transaction fees lead. According to IntoTheBlock data on December 8, Bitcoin transaction fees are up by over 60%, while “gas” in Ethereum has climbed by nearly 50% in the past week.
Bitcoin And Ethereum Transaction Fees Rise By Double-Digits
This surge in activity can be pinned to multiple factors, mainly growing user interest and the ongoing crypto bull market. To illustrate, Bitcoin and Ethereum prices are trending at 2023 highs above $43,500 and $2,300 when writing.
Even so, the crypto community expects these coins to extend gains in the coming weeks and months, partly because of expected institutional capital, projected to be in their billions, flowing to the sphere.
According to IntoTheBlock data, cumulative fees collected in Bitcoin this week stand at $43.8 million, up 61%. On the other hand, $83.3 million in fees has been accrued from Ethereum.
Looking at the historical transaction fees trend, transacting on Ethereum, despite its relatively high transaction processing speeds (TPS), is more expensive than Bitcoin. This can be due to Ethereum’s role in decentralized finance (DeFi), non-fungible token (NFT) minting, and more. Bitcoin is a transactional layer and doesn’t inherently support smart contracts.
Usually, rising on-chain transaction fees are bullish for price and indicate that their respective ecosystem is thriving from increasing adoption. With transaction fees rising in the two leading blockchain ecosystems, more people want to interact with the project. Subsequently, this could support prices since BTC or ETH is used for paying transaction fees.
Will BTC Ease Past 2021 Highs Of $70,000?
As BTC is currently trading above $43,500 and ETH recently broke above $2,300, the possibility of these coins retesting and easing past their all-time highs of $70,000 and $4,800, respectively, cannot be discounted. One of the key drivers of the surge in on-chain activity is the ongoing bull market.
With crypto rising, more people are looking to position themselves, hoping to profit from further price appreciation. This wave of fear of missing out (FOMO) has pushed higher fees and prices.
The demand for liquid and SEC-recognized digital assets will likely increase once the Securities and Exchange Commission (SEC) goes ahead and authorizes the first Bitcoin ETF. This derivative product will allow institutions to invest in Bitcoin confidently through a regulated solution.
As the odds of the SEC approving this product rose from early Q4 2023, BTC and ETH prices started rising in sync. Still, how prices will react once the spot Bitcoin ETF is approved remains to be seen. Once the SEC green-lights a spot Bitcoin ETF, the crypto market will begin looking at Ethereum and whether the agency will approve a similar solution.
Feature image from Canva, chart from TradingView