Last Friday, active deposits on the Ethereum network hit an 18-month high, rising to over 20,000 addresses, marking the highest level since November 2021.
Amount of active Ethereum deposits
So what is driving this spike？
Blockchain analytics platform Santiment tweeted that investors taking profits in PEPE could be responsible for the increase in the number of active addresses.
ETHEREUM GAS FEES AND DEPOSIT INCREASE
The number of active Ethereum deposits has been growing since early May, coinciding with the meme coin craze. And with erratic tokens like PEPE, swapping them for a large and stable coin like ETH might be a smart move.
PEPE TRANSACTIONS INCREASE GAS
Since its launch in April, more than 410,000 PEPE transactions have been completed on Uniswap. And according to one Twitter user's calculations, these transactions burned a total of about 5,300 ETH in gas fees.
Furthermore, the number of gas fees burned by PEPE transactions started to grow faster since May 1, along with Ethereum deposits.
Since then, ERC-20 tokens have been listed on Binance and KuCoin. This could further fuel the PEPE craze and cause more gas fees to be burned, even if the coin meme is unable to sustain its dizzying gains.
Those who are not interested in meme coins may feel annoyed by the above developments. Accordingly, the increase in activity on the Ethereum network has almost immediately increased gas fees, leading to chain consequences throughout the ecosystem.
As a tracker also shows, gas fees on Ethereum have been trending up since the end of April. The average gas fee even briefly surpassed 240 gwei on Friday, the highest level since last May.
Average daily gas fee (Source: Dune)
WILL ETH PRICE BE IMPACTED？
With previous observations, Santiment noted that a spike in active Ethereum deposits often heralds volatility in the price of ETH.
The logic of Santiment is that when investors move idle ETH to exchanges, the increased supply can cause volatility in the market. Therefore, any increase in active ETH deposits could be a harbinger of price volatility.
A major trend can certainly impact supply and demand dynamics. Accordingly, the Ethereum Foundation also recently moved 15,000 ETH to the Kraken exchange. Along with injecting liquidity into the market, if historical patterns repeat, this move could also prevent the ETH price from falling.
In the past, the Ethereum Foundation has also made profits at ETH price peaks, right before major price drops.