What does the current Ethereum fee pump mean?

Author: @brianq; Translation: Baishui, Golden Finance

Although the cost of Ethereum may not be within your follow range for the time being, it has been quietly pumping in the past few weeks. The recent moderate pump has hardly attracted the attention of traders, as historically people are more willing to overlook extra costs when their portfolios are developing in the right direction (since September 15th, ETH has pumped 15.6%). The overall sentiment of Ethereum is still relatively unaffected as many traders are still trying to recover from buying at the peak of $3.7K to $3.9K in May.

But in recent weeks, the fees of Ethereum have been pumping, rising to levels unseen in the ecosystem since the end of May. Understandably, in this inspiring price rebound, network activity has increased, but discussions around these fee pumps remain relatively subdued.

According to Santiment’s social volume data, there has not been a significant increase in discussions about ETH fees, indicating that traders are not very sensitive to these changes. This may be because the average fee of $3.23 is still relatively low compared to much higher fees earlier this year, especially in March when fees reached over $15 during market highs.

One of the main contributors to these fees is Wrapped Ethereum (WETH), which continues to dominate the fee rankings on the Ethereum (ETH) network. WETH plays a crucial role in the Decentralized Finance (DeFi) ecosystem on the ETH network, as it is a ‘wrapped’ version of ETH that can interact more easily with decentralized applications. The dominance of WETH in fee contributions indicates that traders are heavily using DeFi platforms, potentially participating in liquidity pools, trading, and other financial activities that require WETH as the underlying asset. This suggests that the increase in fees may be driven by the growth of DeFi activities, which is typically a positive signal for the health of the ecosystem.

Interestingly, after WETH, the next four contract addresses that contribute to network fees for Ethereum are Hana (HANA), Virtual USD (VUSD), Incept (INCEPT), and Doggo (DOGGO). Each of these tokens tells a unique story of the activities happening on the Ethereum blockchain:

1. Hana (HANA): This Token is becoming increasingly popular in the Decentralized Finance space, which may indicate its growing role in stake or lending platforms. Its increasing network usage may be a sign of deeper integration into the Ethereum Decentralized Finance protocol.

2. Virtual USD (VUSD): As a stablecoin, the cost contribution of VUSD may reflect users seeking a safe haven for stable assets during market fluctuations. Stablecoins like VUSD are popular due to trading, liquidity provision, and risk mitigation, all of which incur costs on the network.

3. Incept (INCEPT): INCEPT is an emerging Token that seems to be gaining momentum. Although it is still relatively new, the increasing contribution of fees may indicate its involvement in niche projects such as games or Non-fungible Tokens (NFTs), which are becoming increasingly popular on the Ethereum network.

4. Doggo (DOGGO): Similar to other memecoins like Dogecoin, the speculative volume of this memecoin has surged. The increasing online activity surrounding DOGGO indicates that traders are betting on its short-term potential, which could increase the overall fee structure of the Ethereum network.

**Despite the pump in fees for the ETH protocol, these levels are still moderate by historical standards. The average fee of $3.23 is far lower than the shocking highs we saw earlier this year, meaning traders will continue to use the network without hesitation. This subdued sensitivity in social discussions further supports the view that unless fees pump significantly, they are unlikely to be a major barrier to Ethereum’s availability in the short term.

**It is worth noting that the occasional pump in fees may sometimes indicate that the market is approaching a speculative peak, as higher fees often coincide with a surge in network activity driven by market speculation. However, the current minor pump in fees is unlikely to cause concern. Instead, it reflects the healthy, continuous rise of activity in the Ethereum ecosystem, especially in Decentralized Finance and speculative trading around smaller Tokens. As long as the fees remain manageable, the Ethereum ecosystem is likely to continue to thrive without significant disruption.