Ethereum: Taking a peek inside what’s fueling ETH’s rally

Key Takeaways

Ethereum is back near its highs, but gas fees? Still cheap. Does this set the stage for a different kind of bull run?

Despite Fed Chair Jerome Powell’s upbeat tone, Bitcoin [BTC] is still stuck chopping below $120k. That signals a market still leaning risk-off.

Ethereum [ETH], though, is stealing the spotlight. It is up 7% on the week, only 2% off its all-time high.

What’s more, the ETH/BTC ratio ripped straight through the 0.04 resistance that hasn’t been touched since election season.

In short, the setup screams capital rotation out of Bitcoin, opening a textbook window for Ethereum. But what if this isn’t just a ratio trade, but the early signs of a structural divergence in flows?

ETH’s record L1 throughput meets suppressed gas costs

There’s a striking paradox in Ethereum’s current setup.

On the surface, ETH looks like it’s riding risk-off flows, with capital rotating out of BTC while Bitcoin chops. But L1 metrics tell a different story, pointing to a structural divergence.

ETH’s daily transactions have blasted past 2 million and active addresses are hovering near 700k, marking levels that used to trigger gas blowouts. This cycle, though, fees (red line) remains compressed near lows.

Source: Token Terminal

Simply put, spikes in Ethereum’s on-chain load, like user demand, transaction throughput, settlement volume have historically tracked one-to-one with fee market stress.

This cycle, though, that correlation has broken. 

Even with surging daily transactions and active addresses, gas fees remain anchored near cycle lows. Thanks to protocol upgrades like EIP-1559 and L2 settlement, Ethereum is scaling horizontally.

Has Ethereum’s network finally caught up with demand?

Ethereum’s fee dynamics are showing a striking evolution.

As the chart illustrates, over the past five years, gas and ETH transfer prices spiked during congestion, especially in the 2021–2022 NFT and DeFi booms. Since 2022, however, spikes are smaller and less frequent.

In fact, this past week, ETH’s median daily gas stayed sub-1 gwei. What’s more, on the 16th and 17th of August, it hit 0.396 gwei and 0.432 gwei, marking the lowest and third-lowest levels in five years.

Source: Dune

Why does this matter? In past ETH cycles, rallies often stalled when gas spiked. Back in 2021, ETH topped around $4.8k, right as median gas and transfer costs surged, showing the network hitting throughput limits.

Fast-forward to now: ETH is only 2% shy of price discovery, yet fees and transfer metrics haven’t budged, leaving headroom for more on-chain activity.

The result? Ethereum’s TVL is pushing close to $100 billion for the first time since 2021. In essence, with network capacity finally keeping pace with demand, ETH’s ATH run can continue without the usual fee friction.