Ethereum’s gas fees have plummeted to their lowest levels in five years, sparking optimism for a potential price rebound shortly. According to Ryan Lee, the chief analyst at Bitget Research, every time Ethereum gas fees drop significantly, it often signals a price bottom for ETH in the mid-term.
This trend, backed by historical data, suggests that Ethereum might be poised for a strong recovery soon.
Ethereum Gas Fees Plunge
Gas fees, the cost users pay to conduct transactions on the Ethereum network, have recently dipped to as low as 0.6 gwei, with some low-priority transactions costing 1 gwei or even less. This marks a dramatic 95% decrease from the 83.1 gwei levels observed in March when the ethereum network experienced a surge in activity.
This sharp decline in fees is primarily due to reduced demand for Ethereum block space and a shift towards more cost-effective blockchains like Solana and Layer 2 solutions.
As a result of the lower fees, there has been a significant increase in ether’s supply. With fewer transactions being processed and burned, approximately 16,000 ETH equivalent to around $42 million at current prices was added to the total supply over the past week. This uptick contributes to an estimated 0.7% growth in ether’s supply this year.
Ethereum’s Dencun Upgrade
The significant drop in gas fees can also be linked to Ethereum’s Dencun upgrade, which improved network efficiency and reduced transaction costs. This upgrade, coupled with the migration of activities such as meme season and Dapp interactions to alternative blockchains, has contributed to the lower fees on Ethereum.
For instance, Solana-based applications like Pump have recently outpaced Ethereum in daily fee generation.
Looking Ahead
Ryan Lee highlights that the current low gas fees could indicate that ETH prices are nearing a bottom, potentially setting the stage for a strong recovery. If this scenario coincides with an interest rate cut cycle, it could create a wealth effect in the market, further boosting ETH prices.
