According to recent insights from a CryptoQuant analyst, Ethereum’s daily mean gas price has reached an all-time low, falling to roughly 2.9 Gwei. This decline in gas prices correlates with a significant drop in daily transaction fees, which now average merely $0.85, marking a multi-year low for the network.
The analyst reported that this cost reduction comes amid a stable or slightly increasing daily transaction volume compared to the past two years, suggesting that lower fees haven’t deterred user activity on the network.
Despite drastically reduced costs, a sustained number of transactions indicates strong network health and continued user engagement, even as financial barriers lessen.
Reason Behind The Plunge In Transaction Costs
Discussing the reason behind the historic lows in the Ethereum fee structure, the CryptoQuant analyst under the pseudonym ‘EgyHash’ attributed it to the Dencun upgrade implemented on March 13 this year.
This update introduced ‘Blobs’—a novel transaction type designed to economize data publishing for Layer 2 networks on Ethereum. Networks such as Arbitrum, Base, and Optimism can post their data on Ethereum at substantially reduced fees, potentially eliminating costs by up to 100%.
This enhancement has directly contributed to the lowered gas prices and has made Ethereum a more accessible platform for a broader user base, the analyst disclosed.
#Ethereum Gas Price Hits New All-Time Low
“Despite the approval of Ethereum ETFs, the price of $ETH has been struggling since the Dencun upgrade. ETH supply has increased by more than 197,000 ETH, and its price has fallen by 35%.” – By @EgyHashX
Link 👇https://t.co/GZ1Dt0NStv pic.twitter.com/PtbjWGyUzc
— CryptoQuant.com (@cryptoquant_com) August 19, 2024
However, EgyHash also highlighted that although lower transaction costs benefit users by making the network more affordable for various applications, they pose a nuanced challenge for investors. EgyHash noted in the post:
While low fees are beneficial for users, they might not be advantageous for investors, especially given the substantial portion of Ethereum’s usage that is being offloaded to its Layer 2 networks, and the potential problems this could cause, such as user and liquidity fragmentation.
Ethereum Market Performance
So far, ETH has been unable to maintain its price above notable price marks. Over the past week, ETH has plunged by 4.2%–this bearish performance has brought the asset to currently trade for $2,591 at the time of writing.
As highlighted by EgyHash, this struggle for the ETH’s price to hit new heights has been around since the Dencun upgrade and has continued despite the recent approval of spot Ethereum exchange-traded funds (ETFs).
Featured image created with DALL-E, Chart from TradingView