Ethereum Transaction Fees Surge Despite Decline in Active Accounts

Ethereum’s transaction fees have surged in recent weeks, recovering from year-to-date lows. However, despite the spike, the number of active addresses on the network has dropped to its lowest point in 2024. This unusual dynamic paints a complex picture for the world’s second-largest cryptocurrency.

Transaction Fees Triple in September

At the start of September, Ethereum’s average transaction fee had plummeted below $1, reaching its lowest level since July 2020. This marked a significant low, occurring well before major events like Ethereum's transition to proof-of-stake or the rise of the NFT market.

However, things quickly turned around. By September 21, the seven-day moving average transaction fee surged to $3.52, more than triple its early-month value of $0.85, according to data from The Block.

Ether Burn Rate Spikes Alongside Fees

This increase in transaction fees also led to a sharp rise in Ethereum’s burn rate. The amount of Ether burned skyrocketed from 80.27 ETH on September 1 to 1,360 ETH by September 21—an eye-popping 1600% increase in just three weeks.

Among the top gas-consuming smart contracts driving this spike were decentralized exchange Uniswap, both its V2 and V3 versions. Other contributors included Telegram-focused crypto trading bots like Maestro and Banana Gun, along with transactions involving stablecoins like Tether (USDT) and Circle’s USD Coin (USDC).

Active Accounts Drop to Year-to-Date Lows

Despite the rise in fees and burn rates, the number of active addresses on Ethereum has seen a notable decline. The seven-day moving average of active accounts dropped 11% in September, hitting a year-to-date low of approximately 385,000 accounts. This is the lowest number of active accounts since December 2023, signaling that while transaction costs are rising, fewer users are actively engaging with the network.

Ethereum Under Scrutiny

Ethereum has recently been under the microscope within the crypto world. The ratio of Ethereum’s market cap compared to Bitcoin’s hit its lowest level since 2021 last week before staging a slight recovery. Bitwise CIO Matt Hougan expressed skepticism about Ethereum’s current state, noting, “No one likes Ethereum right now,” and suggesting it may be a “contrarian bet” at the moment.

Adding to the pressure, daily revenue for Ethereum stakers has also dropped to a six-month low, further highlighting the mixed signals in the network’s recent performance.

Conclusion: Mixed Fortunes for Ethereum

September has been a month of contradictions for Ethereum. While transaction fees and burn rates have surged, signaling renewed activity among high-gas-consuming contracts, the decline in active addresses and staking revenue suggests a shrinking user base and investor hesitation. As Ethereum navigates these challenges, its future performance may hinge on balancing innovation with user engagement in an increasingly competitive market.