- Ethereum gas fees slump to new lows, offering the network a chance to prove its ultrasound money narrative.
- Gas fees crashed to 7.941 Gwei for the first time since 2020, with analysts pointing to several reasons.
- Amid the slump in gas prices, ETH embarked on a small rally to trade above the $1,500 mark.
After years of sky-high gas fees, the Ethereum (ETH) network has completed a turnaround after recording its lowest transaction fees for the first time in over three years.
On Oct. 14, Ethereum’s average gas price stood at 7.941 Gwei, a figure that got the entire community beaming with pride. The last time Ethereum’s gas fees recorded a similar figure was in April 2020, surging by over 100% alongside the rush of non-fungible tokens (NFTs) and decentralized finance (DeFi).
Exactly a year ago, the figure stood at 19.68 Gwei, leaving pundits with dwindling hopes for a reduction in transaction fees. Right off the bat, several contributory factors exist for the plummeting gas fees, including the decline of NFTs and the significant reduction in DeFi activities.
At the height of their powers, digital collectibles and DeFi yield farming made up a large chunk of transactions that clogged the Ethereum network, sending gas prices to astronomic levels. Speculative trading activity is another reason for the decline in gas fees, given the extended bear market and sideways trading of the asset class.
Another theory for the dwindling values of gas fees is the adoption of new layer 2 networks designed to improve Ethereum’s scalability. Pundits have described the rise of Polygon, Optimism, and Arbitrum as relieving a chunk of the pressure from the layer 2 network while mulling the possibilities of even lower gas fees.
According to on-chain analysts, the new trend may make ETH inflationary, bringing its claim of being ultrasound money under greater scrutiny.
“The low fee regime represents a major transition for Ethereum, trading off high revenues and deflationary supply for the promise to be able to attract mainstream users through layer 2s,” said Lucas Outumuro, IntoTheBlock’s head of research.
Eyes on the $1,700 mark
Despite a choppy start to life that saw ETH fall to $1,500 in October, bulls remain optimistic that the asset can ride the wave of low gas fees to recapture the $1,700 mark. Bulls are hinging their belief on a neutral stance to the bearish sentiment in the markets as they hope for stronger buying pressures at present levels.
In the last 2 hours, ETH has gained nearly 2% while trading volumes recorded a 5% jump over the last day. In other markets, Bitcoin (BTC) currently trades at $28K, with several altcoins riding the wave of the largest cryptocurrency to record small wins.