Ethereum Transaction Fees Plummet to Yearly Low: Potential Impact on ETH Price
Find out how the recent plummet in Ethereum transaction fees could affect the price of ETH. Read more on BeInCrypto.
Posted 10 months ago in Ethereum
Ethereum average transaction fee has fallen to a yearly low amid the recent decline in on-chain activity the blockchain network has seen.
Ethereum average transaction fee has hit its lowest point of the year, a change that aligns with reduced on-chain activity.
Ethereum’s reduced transaction fees can be attributed to a recent decline in network activity. To provide context, on September 21, Binance elevated the network’s average transaction fee above $10 while conducting routine asset consolidation across various wallets. Had these transactions occurred earlier in the year, amidst the meme coin craze or the peak of NFT trading volumes, their impact on network fees might have been less pronounced. Binance’s actions notably influenced the gas fees because no other significant network activities coincided with the event. This underscores the cooling of Ethereum’s network activity in response to the current market conditions.
Market observers interpret this decrease in network activity as a potential positive for Ethereum. Santiment noted that declining Ethereum fees frequently align with increased network utilization. According to the firm, this could potentially boost the price of ETH and contribute to a market cap recovery. “Ethereum network fees have dropped down to its lowest level of 2023, at just $1.15 per transaction. Historically, we see utility begin rising as ETH becomes more affordable to circulate. Increased utility can then lead to recovering market cap levels,” Santiment said.
With Ethereum network fees dropping to a yearly low, the digital asset has turned inflationary as fewer tokens are being burned. In the last seven days, Ethereum’s supply has increased by 6,371 ETH, according to Ultrasoundmoney. The lead developer at Blockchair, Nikita Zhavoronkov, explained that ETH was inflationary because of the network fees. “Ethereum fees, which are supposed to burn ethers, are everywhere but not on Ethereum: its own L2s (Arbitrum, Polygon, etc.) and EVM competitors (BNB, Avalanche C, etc.),” Zhavoronkov said.
Ethereum’s move to a proof-of-stake algorithm last year aimed to reduce its supply through burning. However, the decrease in network activity has hindered this burn rate. Likewise, the proliferation of layer-2 networks is increasingly seeing most of the network activity and relegating ETH’s mainnet to the background.
Disclaimer: This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.
Last updated 9/24/2023, 9:54:43 PM
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