The second-largest blockchain, Ethereum, is experiencing a drop in gas fees, which are now at levels seen almost five years ago. Industry experts have suggested that the drastic reduction in network fees could signal a possible price bottom for Ethereum’s native token, Ether (ETH).
Ethereum Gas Fees Drop to $0.04
These experts argue that the declining gas fees are due to reduced network demand, recent upgrades, and increased adoption of layer-2 networks. As of this writing, the cost of transacting on the Ethereum network is only $0.04 per transaction. By comparison, Ethereum gas fees were above $10 at the start of the year.
While lower network costs make transactions affordable for Ethereum users, they reduce the number of ETH tokens to be burned, causing inflationary pressure on the coin’s supply. And if ETH’s supply becomes higher than demand, the token may fail to rally.
Nonetheless, crypto experts are optimistic that ETH could witness an upward movement over the coming days, arguing that massive drops in network fees have historically coincided with ETH’s price bottoms.
Crypto Analyst Attributes the Drop in Gas Fees to Sluggish Market
Meanwhile, Bitget Research Chief Analyst Ryan Lee says the decline in gas fees is fueled by the current sluggish market where altcoins are failing to rally, thus leading to reduced on-chain activity. Moreover, Lee claims that cheaper and faster blockchain networks like Solana have diverted traffic from Ethereum.
While reduced gas fees have slowed token burning, Lee says this shouldn’t be viewed as a negative development. Instead, it should be considered a sign that layer-2 networks are improving efficiency as expected.
“Dencum is Fueling Gas Fee Drops,” Bitfinex Analysts Say
Bitfinex analysts, on the other hand, have attributed the drop in Ethereum gas fees to the Dencum upgrade, which burns a portion of each transaction cost to reduce ETH’s token supply. They also believe that Ether has hit its price bottom and expect an upward move soon, fueled by other factors like possible Fed rate cuts in September and the hype around the US Presidential election.
Whether Ethereum will attract users again, pushing gas fees upwards when ETH starts rallying remains to be seen.
