Ethereum’s transaction fees have declined to a 4-year low, suggesting a decreased on-chain activity. That is according to data reported by CryptoRank.io today.
Why Ether transaction fees dropped
As per the metrics, the 7-day moving average of transaction fees on the Ethereum network decreased to a low of $0.94 on Thursday, Feb.20. That is a massive 84% drop from the high of $2.27 mark seen on Saturday, Feb.15. This fall in Ethereum transaction fee is the lowest since July 2020.
Meanwhile, Ethereum’s median gas price, measured in terms of Gwei, also experienced a significant drop. On Saturday, Feb.15, the average Ethereum gas price stood at 1.61 Gwei. But on Thursday, Feb.20, the gas price fell to a minimum of 1.39 Gwei, a historical low last seen in 2020.
These significant drops in transaction fees and median gas prices on the Ethereum network are often triggered by reduced no-chain activity and recent network updates.
The current Ethereum average transaction fee stands at $0.94 in comparison with $15.21 seen over the past two years. This reduction could be an opportunity for investors and traders to engage the wider crypto market.
A lower transaction fee normally signals that the network is not congested. However, when transaction costs are extremely down, like the current levels, this signifies that users see prices as relatively bearish or low.
However, a decrease in fees can be beneficial for Ethereum’s medium and long-term price trends, as it encourages new users to come on the market. The current extremely low fees could attract retail traders, and in the long run, help restore the network’s activity and usefulness.
Increased transaction fees often signify high activity on the Ether network. This increase normally happens when ETH prices surge rapidly, an indication that investors and traders use Ethereum-based DApps in big numbers.
Ethereum upgrades
On Monday, Feb.17, reports emerged that the Ethereum network lowered its transaction fees by 70%, fueling rumors about an imminent increase in ETH prices.
As a result, the Ethereum network’s transaction fee has experienced a significant drop over the week from $23 million to $7.5 million per day. This happens when the blockchain is going through crucial changes, with two major upgrades, Pectra and Fusaka, planned to be unveiled in April this year.
The huge decrease in Ethereum’s gas fee is an important milestone, especially for retail traders and SMEs looking forward to adopting crypto assets.
