Runes have been taking over the bitcoin network. This new token standard that launched with the latest Bitcoin halving has been mentioned before in this newsletter, in the context of pushing the average transaction fee on Bitcoin upwards even before their debut as hype stirred and helping miners combat a lower block subsidy reward as transaction fee revenue reached new highs.

And both of those trends largely still hold. The 7-day moving average of the average transaction fee on Bitcoin reached over $40 last week, 10 times as high as the $4.10 average on Ethereum.

And the total fees paid on Bitcoin have also outstripped Ethereum, with the 7-day moving average of total fees paid on the network climbing to $25.77 million (un-averaged the number got as high as $80 million). Regardless of with a moving average or not, the metric hit a new all-time high.

One metric that has also flipped recently is the market capitalization to transaction fee ratio of Bitcoin and Ethereum. This metric looks at the market cap of the native asset for the blockchain divided by the annualized amount of total fees paid on the network.

It is sort of like looking at the price-to-earnings ratio of a traditional company, which can be calculated by dividing a company’s market cap by its net income. Net income for a blockchain network is basically the total amount of fees it collects since that is the cost that users are paying to interact with it. Looking at one P/E ratio doesn’t really mean much; it is more helpful to make comparisons among peers. A higher P/E ratio can sometimes mean a company is overvalued since its market cap is a higher multiple of what it is earning, and similarly a lower P/E can indicate the opposite.

For the first time since July 2019, the 7-day moving average of Bitcoin’s market cap to transaction fee ratio fell below that of Ethereum. Earlier this month, the moving average of Bitcoin’s ratio was 2,400 compared to just 118.33 for Ethereum, but on April 25, Bitcoin’s ratio had fallen down to 220.77, lower than Ethereum’s 227.12.

This doesn’t mean Bitcoin is now undervalued and Ethereum is overvalued. Based on the calculations, it is natural for Bitcoin’s ratio to drop when its fees increase. It just so happens that even in periods of high fees before, Bitcoin’s larger market cap kept its ratio higher than that of the second-largest cryptocurrency. The ratios did get close to inverting back in December 2023 when Bitcoin saw a surge in block demand due to Ordinals excitement. However, it is still an interesting metric to look at, and it demonstrates the magnitude of demand that has hit the network in the wake of the Runes protocol.

The ratio inversion was also short-lived, as fees on Bitcoin have begun to slow more recently.

This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry’s most thought-provoking trends.