How memecoins helped Ethereum’s transaction fees
The fee spike also accelerated the rate at which ETH was moving out of circulation.
- Ethereum’s weekly fees hit a 22-week high on the meme coin hype.
- ETH’s supply on exchanges increased, prompting concerns of a correction.
Ethereum’s [ETH] bullish run on the price charts brought it to $3,949 at press time, setting it for a likely breach past the magical mark of $4,000.
The second-largest cryptocurrency was up nearly 15% over the week, according to CoinMarketCap.
The soaring prices got traders excited, as daily trading volumes hit multi-year highs of more than $20 billion, as per crypto market data provider Kaiko.
Ethereum blockchain gets busy
Apart from the impressive show in the market, the blockchain was also experiencing heightened demand for its blockspace.
According to on-chain analytics firm IntoTheBlock, Ethereum validators collected over $190 million in fees over the week, the highest since May 2022, representing an increase of 78% from last week.
With this, Ethereum’s annualized fee rate surged over $10 billion for the first time since early 2022.
The high network demand was attributed to the ongoing meme coin bull market.
Top Ethereum-based coins such as Pepe [PEPE], Shiba Inu [SHIB], and Floki [FLOKI] have been pumping this week, as retail investors returned to the cryptocurrency market.
ETH burn rate spikes
The fee spike also accelerated the rate at which ETH was moving out of circulation. Note that a set amount of ETH is burned for each transaction.
This corresponds to the minimum amount required for a transaction to be considered valid, i.e., base fee.
According to AMBCrypto’s analysis of ultrasound.money data, more than 33K ETH were burned over the week, taking the annual deflation rate to 1.45%.
As per the supply-demand factors, such deflationary pressure might have a positive impact on ETH’s long-term economic dynamics.
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A cause for concern?
ETH’s rapid price gains over the week pushed the total supply in profit to over 95%, as per AMBCrypto’s analysis of Santiment data.
Interestingly, nearly 320,000 ETH coins were transferred to exchanges in the week. This raised alarms that traders might look to profit-take in the days to come, causing a correction.
