Ethereum’s transaction numbers have risen to just about 600,000 from a recent low of 434,000 during a 24 hours period.
They have now returned to the levels of early September, when ethereum’s price was at about $300, after eth transaction numbers saw a sharp V spike since September 29th.
This increased network activity may be related to the fact ethereum is now running at just about 50% capacity.
That has sent fees to its lowest level for the year, below 1 cent, even as some 600,000 transactions are made everyday for the past two days.
Transaction numbers are known to correlate with price, although whether it is a leading or lagging indicator is unclear, with one theory being they move concurrently.
If we look at the historic transaction levels for ethereum, you can see how easily the chart can be mistaken for price itself:
The recent sharp V spike seems interesting because price hasn’t likewise seen a sharp V jump. It has recovered slightly since it reached a low of $167 on September the 12th, but since then it has stayed at around $222.
Since September 29th, for example, ethereum’s price has stayed in a fairly straight line, while transactions have sharply jumped.
One explanation may be that the rise in eth transactions is perhaps more related to this newly available capacity that has recently appeared.
As you may know, ethereum currently has a limited capacity of about 8 million gas usage a day which is called the gas limit.
It can be compared to the blocksize limit, but that would be slightly misleading because to simplify the 8 million limit can be reached with 1MB of transaction data as with 100kb.
Smart contract transactions consume more gas, thus meaning the limit would be reached with less transactions. Such sort of transactions were very prevalent in eth during much of this summer as random token airdrops kept being carried out.
Now it appears this airdrop usage has gone, so ethereum is back to its normal operations where capacity is at about 1.4 million transactions a day, or circa twice the current level.
It may be that there was already demand for 600,000 transactions but due to capacity limits it was not partaking. Now that space has become available, we see this sharp rise.
Yet it may also be that some ethereans are returning. Plenty would have sold at the high in December-January, so they might now be entering the market again.
As you know, there’s a joke going around that no one leaves crypto, except perhaps temporarily. All that fiat therefore might be waiting on the line and perhaps the first of it is being show on the transactions chart.
The theory here is that the more people who have eth, the more would be transacting. Likewise, the more that go to fiat, the less transactions because there are less people who have eth.
You’d expect however increased demand to be reflected on the price as well as transaction levels, but where price is concerned there is the supply equation, so maybe this transaction chart is telling us something, or maybe not. We’ll know soon enough.