Ethereum Fees Surge as Dencun Upgrade Approaches

Recently, Ethereum [ETH] transaction fees have increased dramatically, reflecting the asset’s price increase and the network’s preparations for an upgrade aimed at reducing fees in the ecosystem.

Ethereum transaction fees reached their highest level in recent months, generally since the beginning of March. According to the chart on Glassnode, at the beginning of the month, transaction fees were hovering around 6,300 ETH. To date, this number has reached more than 9,000 ETH, marking the highest level in more than 10 months.

The increase in transaction fees corresponds to a significant increase in trading volume over the past few weeks, and also coincides with the latest update plans of Ethereum developers.

Source: Glassnode

Countdown to Ethereum Dencun

Ethereum developers have set a target date of March 13 for the highly anticipated Dencun upgrade, introducing the most significant changes from April 2023. The most notable feature of the Dencun upgrade is the “proto-dank sharding” feature, designed to reduce transaction costs on backend “layer 2” networks built on Ethereum.

Source: Santiment

This is done by providing a separate space to store data, introducing a new transaction layer that combines data “blobs” to reduce the cost of publishing transactional data in aggregate. These “blobs” serve as an independent space within the transaction, where roll-up networks or other protocols can temporarily store data.

Analysis of Ethereum volume data provides insight into the recent spike in network fees. On the Santiment chart, on March 6, trading volume surpassed $51 billion. This is the first time since 2022 that Ethereum recorded such a large transaction volume. The day before, volume increased to more than $47 billion, reaching a monthly high. As of the time of this writing, volume has dropped significantly to over $27 billion, showing a notable decline.

Source: Trading View

Ethereum experienced a price increase to around $3,820 at the close of trading on March 6, a 7% increase from the previous price based on daily time frame analysis. This price marks ETH’s highest in more than a year. However, at the time of this writing, the price has slightly decreased by about 0.4%, stabilizing at about $3,815. Despite this small decrease, ETH remains firmly within the $3,800 price range, showing a strong and resilient bullish trend at the time of this writing.