Ethereum's Price Rally: What's Driving the ETH Surge?
Key Takeaways
Ethereum is approaching its previous highs, yet gas fees remain surprisingly low. Could this indicate a unique bull run fueled by enhanced network efficiency?
Despite optimistic remarks from Fed Chair Jerome Powell, Bitcoin (BTC) is struggling below $120k, suggesting continued risk aversion in the market.
Ethereum (ETH), however, is outperforming. It's up 7% for the week, just 2% below its all-time high.
The ETH/BTC ratio has broken through the 0.04 resistance level for the first time since the election season.
This suggests a capital shift away from Bitcoin, creating an opportunity for Ethereum. But is this more than just a ratio trade? Is it the start of a fundamental divergence in capital flows?
Ethereum's Throughput and Low Gas Costs
Ethereum presents a compelling paradox right now.
While ETH's price action might suggest it's benefiting from capital rotating out of BTC, Layer 1 (L1) metrics tell a different story, indicating a structural shift.
Ethereum's daily transactions exceed 2 million, and active addresses are near 700k—levels that previously caused significant gas fee spikes. However, this cycle, fees remain compressed near their lows.
Network Capacity vs. User Demand
Historically, increases in Ethereum's on-chain activity, like user demand and transaction volume, directly correlated with higher gas fees.
But this correlation has broken down in the current cycle.
Despite the surge in daily transactions and active addresses, gas fees are still low, due to protocol upgrades like EIP-1559 and Layer 2 (L2) scaling solutions.
Has Ethereum Caught Up?
Ethereum's fee structure is evolving.
Over the past five years, gas and ETH transfer costs spiked during network congestion, especially during the NFT and DeFi booms of 2021-2022. Since then, spikes have become less severe and frequent.
Recently, Ethereum's median daily gas stayed below 1 gwei. On August 16th and 17th, it reached 0.396 gwei and 0.432 gwei, respectively, the lowest and third-lowest levels in five years.
In previous cycles, ETH rallies often stalled when gas prices spiked. In 2021, ETH peaked around $4.8k as gas and transfer costs surged.
Now, ETH is close to price discovery, yet fees haven't increased significantly, suggesting more room for on-chain activity. Codeum provides security audits to safeguard your funds on-chain while exploring these exciting opportunities within the Ethereum ecosystem.
As a result, Ethereum's TVL (Total Value Locked) is nearing $100 billion for the first time since 2021. With network capacity now keeping pace with demand, ETH's ATH run can continue without the typical fee-related friction.