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

Samuel Edyme

2 years ago

3 mins read

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Ethereum transaction fees are once again hitting highs last seen since May 2022. This development has raised concerns about the impact on the Ethereum network usage and its native cryptocurrency, ETH.

Ethereum, the second-largest crypto by market capitalization, is one of the leading decentralized finance (DeFi) and non-fungible tokens (NFTs) platforms. The network has been experiencing a surge in activity due to the increasing popularity of memecoins such as PEPE, which has caused fees to spike.

Rising Transaction Fees: A Cause For Concern

On May 2, the median average transaction fee on the Ethereum network soared to around 87 gwei, according to Dune Analytics. This spike was mainly attributed to the increased on-chain activity surrounding memecoin trading, according to Hildobby, a pseudonymous data researcher at VC firm Dragonfly.

Ethereum daily median gas price. Source: Hildobby

Memecoins such as Pepe the Frog-themed token have been enjoying a renaissance recently, with the token price soaring over 266 times in just four days in April. The memecoin’s market cap rose to over $500 million this week before crashing below $400 million again.

While this surge in activity may indicate increasing interest in the crypto market, it also highlights concerns about the network’s scalability and the impact of rising fees on users. High transaction fees can deter users from interacting with decentralized applications on the Ethereum network; as the fees increase, smaller users are priced out of the platform and its applications.

Notably, the rise in memecoin trading activity, which increased the number of transactions on the Ethereum network, leading to a surge in fees, has also made decentralized exchanges (DEXs) on Ethereum experience the highest level of users since 2021.

Dune Analytics data shows that Ethereum-based DEXs saw a surge in volume, with the total trading volume on these platforms surpassing $63 billion in April alone. This represents a significant increase from March, when the total trading volume was around $31 billion.

What This Means For ETH

It is worth noting that the rising transaction fees on the Ethereum network are seen as a disadvantage to the value of ETH, as users may seek alternative blockchains with lower transaction costs. An instance of this is the increasing interest in other L1 blockchains such as Solana (SOL), Cardano (ADA), Fantom (FTM), and so on.

However, Ethereum co-founder Vitalik Buterin recently suggested that the network could quickly scale up to 100,000 transactions per second. This could help alleviate network scalability concerns and reduce transaction fees.

Regardless, the increased activity may be a positive sign of growing interest in the crypto market; but it has an expensive price tagged. The rise in fees could discourage smaller transactions and lead to a decline in demand for ETH.

Wwith Ethereum’s scalability improvements in the pipeline, it remains to be seen how the network will evolve in the coming months. Meanwhile, ETH price has declined 0.4% after a potential surge to trade above $2,000, last month.

Ethereum (ETH) price chart on TradingView — Ethereum (ETH) price is moving sideways on the 4-hour chart. Source: ETH/USDT on TradingView.com

ETH currently trades for $1.872 at the time of writing. ETH has a 24-low of $1,855 and a 24-high of $1,919, according to data from CoinMarketCap. Regardless of the market decline, the asset’s trading volume has only ranged between $8 billion and $9 billion in the past two weeks.

Featured image from Shutterstock, Chart from TradingView

Samuel Edyme

Meet Samuel Edyme, Nickname - HIM-buktu. A web3 content writer, journalist, and aspiring trader, Edyme is as versatile as they come. With a knack for words and a nose for trends, he has penned pieces for numerous industry player, including AMBCrypto, Blockchain.News, and Blockchain Reporter, among others.

Edyme’s foray into the crypto universe is nothing short of cinematic. His journey began not with a triumphant investment, but with a scam. Yes, a Ponzi scheme that used crypto as payment roped him in. Rather than retreating, he emerged wiser and more determined, channeling his experience into over three years of insightful market analysis.

Before becoming the voice of reason in the crypto space, Edyme was the quintessential crypto degen. He aped into anything that promised a quick buck, anything ape-able, learning the ropes the hard way. These hands-on experience through major market events—like the Terra Luna crash, the wave of bankruptcies in crypto firms, the notorious FTX collapse, and even CZ’s arrest—has honed his keen sense of market dynamics.

When he isn’t crafting engaging crypto content, you’ll find Edyme backtesting charts, studying both forex and synthetic indices. His dedication to mastering the art of trading is as relentless as his pursuit of the next big story. Away from his screens, he can be found in the gym, airpods in, working out and listening to his favorite artist, NF. Or maybe he’s catching some Z’s or scrolling through Elon Musk’s very own X platform—(oops, another screen activity, my bad…)

Well, being an introvert, Edyme thrives in the digital realm, preferring online interaction over offline encounters—(don’t judge, that’s just how he is built). His determination is quite unwavering to be honest, and he embodies the philosophy of continuous improvement, or “kaizen,” striving to be 1% better every day. His mantras, “God knows best” and “Everything is still on track,” reflect his resilient outlook and how he lives his life.

In a nutshell, Samuel Edyme was born efficient, driven by ambition, and perhaps a touch fierce. He’s neither artistic nor unrealistic, and certainly not chauvinistic. Think of him as Bruce Willis in a train wreck—unflappable. Edyme is like trading in your car for a jet—bold. He’s the guy who’d ask his boss for a pay cut just to prove a point—(uhhh…). He is like watching your kid take his first steps. Imagine Bill Gates struggling with rent—okay, maybe that’s a stretch, but you get the idea, yeah. Unbelievable? Yes. Inconceivable? Perhaps.

Edyme sees himself as a fairly reasonable guy, albeit a bit stubborn. Normal to you is not to him. He is not the one to take the easy road, and why would he? That’s just not the way he roll. He has these favorite lyrics from NF’s “Clouds” that resonate deeply with him: “What you think's probably unfeasible, I've done already a hundredfold.”

PS—Edyme is HIM. HIM-buktu. Him-mulation. Him-Kardashian. Himon and Pumba. He even had his DNA tested, and guess what? He’s 100% Him-alayan. Screw it, he ate the opp.

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