Ethereum: The Deep Drivers Behind the Rise of ETH and the Mystery of Gas Fees
Despite the optimistic remarks from Federal Reserve Chairman Jerome Powell failing to boost market sentiment, the price of Bitcoin [BTC] has still fallen below $120,000, indicating a risk-averse trend in the market.
Ethereum [ETH] has become the spotlight of the market, with a weekly increase of 7%, just 2% away from its all-time high.
Additionally, the ETH/BTC ratio has broken through the resistance level of 0.04, which has not been touched since the election season, indicating that funds are flowing from Bitcoin to Ethereum.
Is this phenomenon merely a ratio trade, or an early signal of structural differentiation in fund flows?
On the surface, ETH seems to benefit from a wave of risk-averse funds flowing out of Bitcoin, but L1 data suggests that the situation is not that simple.
The daily trading volume of ETH has surpassed 2 million transactions, and the number of active addresses is around 700,000, which usually triggers a surge in Gas fees. However, in this cycle, transaction fees (red line) remain near a low point.
The peak on-chain load for Ethereum, such as user demand, transaction throughput, and settlement volume, has historically been closely related to fee pressure. But this time, that correlation has been broken.
Has the Ethereum network finally met the demand?
The dynamics of Ethereum's fees are undergoing significant changes.
Over the past five years, Gas fees and ETH transfer prices have often surged during congestion, especially during the NFT and DeFi boom of 2021-2022. However, since 2022, the magnitude of price surges has been smaller and less frequent.
In fact, over the past week, the median daily Gas fee for ETH has remained below 1 gwei. On August 16 and 17, the fee dropped to 0.396 gwei and 0.432 gwei, respectively, marking the lowest and third lowest levels in five years.
Why is this trend important? In past ETH cycles, when Gas fees surged, the upward momentum often stalled. For example, when the price of ETH broke $48,000 in 2021, Gas fees also surged, indicating that network throughput had reached its limits.
Today, ETH is just 2% away from its all-time high, but fees and transfer metrics have changed little, leaving room for more on-chain activity.
What will the outcome be? Ethereum's Total Value Locked (TVL) is nearing $100 billion for the first time since 2021. As network capacity finally catches up with demand, the price of ETH may continue to rise without being hindered by previous fee friction.
