Categories: MarketsMenafn

Ethereum Gas Fees Hit Record Low

Ethereum’s gas fees have plummeted to an all-time low, correlating with a significant decrease in whale activity.

On Aug. 18, the average daily gas price on the Ethereum (ETH) network fell to an unprecedented 2.9 Gwei, equivalent to approximately $0.026, according to data from CryptoQuant. Although there has been a slight recovery, with gas prices now hovering around 3 Gwei, this drop comes when the cryptocurrency’s price struggles below $2,600.

The sharp decline in gas fees also coincides with a broader downtrend in Ethereum’s market performance. Moreover, the ETH burn rate hit a record low recently, reflecting a reduced transaction volume as the market consolidates around the $2,600 level.

Dencun Upgrade Drives Fee Reduction

One of the primary drivers behind the reduction in Ethereum gas fees is the recent Dencun upgrade, launched in March. This upgrade enabled Layer 2 networks to execute data blobs directly on the Ethereum mainnet.

The upgrade, intended to improve the scalability of Ethereum, has had the side effect of reducing overall network activity and, consequently, gas fees. Meanwhile, the CryptoQuant analysis has raised concerns about the potential long-term impact of these declining fees.

It warned that the reduced network fees might lead to “user and liquidity fragmentation,” posing challenges to the network’s sustainability. This fragmentation could undermine ETH’s position as the dominant smart contract platform, as users and developers could migrate to other blockchains with more consistent activity levels.

Notably, Ethereum’s supply has increased by 197,000 tokens, while its price has noted a sharp decline of 35% since the upgrade. This drop is remarkable given the recent approval of spot ETH exchange-traded funds (ETFs) in the US, which many expect would boost the cryptocurrency’s price.

Over 50% Decline in Ethereum Whale Activity

The decline in whale activity further exacerbates ETH’s current challenges. Data from Santiment reveals a consistent reduction in large transactions, defined as those exceeding $100,000 in value.

ETH Whale Transaction Count. | Source: Santiment

The number of such whale transactions dropped from 5,371 on Aug. 12 to 2,138 by Aug. 19. Per the latest Coingecko data, ETH’s price has decreased by 2.1% over the past 24 hours, trading at $2,597.

Despite the price drop, the daily trading volume has surged by over 33%, surpassing $10 billion. This increase in trading volume suggests heightened market activity. Yet, it is still uncertain whether this trading volume surge will lead to a sustainable price recovery for ETH.

Jerry Rolon

After working for 7 years as a Internet Marketer, Jerry now aims to explore the journalistic side of Internet. With his impeccable knowledge in this domain, he churns out some of the best news articles from the internet niche. With respect to acedamics, Jerry earned a degree in business from California State University.

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