Ethereum transaction fees have fallen to their lowest level since January, according to on-chain data, a sign that the bottom could be near.
Ethereum transfer fees plummeted as the network cooled.
According to data from on-chain analytics firm st tly, Ethereum transaction fees have taken a notable hit recently. Here, “transaction fee” refers to the average fee (in USD) that senders on the ETH network currently charge for transfers.
The value of this metric reflects the traffic conditions typically witnessed by the blockchain. As more users move around the network, average fees tend to go up.
This is caused by the limited capacity of the blockchain to process transactions, which can cause the network to become congested during periods of high activity, causing transactions to wait for a while.
Users who don’t want to deal with latency can charge high fees for their transfers, allowing validators to prioritize their moves. With so many senders competing with each other, averages can explode quickly, and block space can become more precious.
However, if little activity is observed on the Ethereum blockchain, transaction fees may remain low because users have little incentive to pay significant fees.
We now have a chart showing Ethereum average fee trends over the past few months.
The value of the metric seems to have been quite low in recent days | Source: Santiment on X
As shown in the graph above, Ethereum transaction fees have recently plummeted, reaching a low of $2.07. This is the lowest value the indicator has touched since January of this year.
This fee holiday means that network activity for the cryptocurrency is dead. Traffic volume is usually interconnected with the atmosphere surrounding a property. Santiment explains:
Markets historically move between sentimental cycles where it feels like crypto is “reaching the moon” or “crypto is dead,” which is very often observed through trading fees.
The lack of network activity means that investors may not be very interested in the coin at the moment. But this may not be bad news for asset prices.
According to the analytics firm, low average fees tend to coincide with bottoms in Ethereum, while peaks in the indicator can occur along with the formation of tops.
As you can see in the chart, the price of ETH was near bottom in January when fees last hit a low of $1.75. Likewise, the indicator soared to $15, reaching its peak last month.
It remains to be seen whether a similar pattern will emerge this time around and whether Ethereum will now approach bottom.
ETH price
Ethereum had previously plummeted below $2,900, but the asset appears to have rebounded as the price recovered to $3,100.
Looks like the price of the coin has been overall moving sideways recently | Source: ETHUSD on TradingView
Kanchanara from Unsplash.com, featured image from Santiment.net, chart from TradingView.com