- Ethereum gas fees have dropped to their lowest level in five years, falling below 2 gwei since the beginning of August 2024
- The decline in gas fees coincides with a drop in the price of Ethereum (ETH), which was trading at $2,560 at the time of writing, down 3.3% in the past 24 hours
- Factors contributing to the lower gas fees include investor sentiment, a general decline in the crypto market, and the Dencun upgrade which significantly reduced Ethereum transaction fees
Ethereum’s median gas fees have fallen to levels not seen in over 5 years, dipping below 2 gwei since early August. This drop can be attributed to several factors.
What Are Gas Fees?
Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum blockchain network. These fees rise and fall based on network congestion and market sentiment.
When Are Fees Usually High?
Gas fees typically surge when hype and excitement in the crypto markets are high, such as during major rallies. About 6 months ago, fees hit highs not seen since May 2021 as interest peaked around the launch of Bitcoin spot ETFs in the US.
Current Low Fee Levels
According to data from Dune Analytics, median Ethereum gas fees have stayed below 2 gwei since August 3. While there have been momentary spikes, fees quickly return to under 10 gwei.
Possible Reasons Behind the Decline
Experts attribute the gas fee decrease to factors like negative market sentiment, declining crypto prices, and the recent Dencun upgrade which reduced Ethereum transaction fees. ETH prices have fallen over 30% in the past month.
Impact on Market Dynamics
The reduced gas fees could signal the start of an altcoin rally, as transaction costs drop. For Ethereum holders, the 2300-2380 range is considered critical support if prices continue falling. Most addresses that bought ETH in that range remain in profit currently.
Conclusion
While lower gas fees provide some relief to Ethereum users, it remains to be seen whether they will persist if market sentiment improves. For now, the network is significantly more affordable to transact on. The effects on the broader crypto ecosystem also bear monitoring.
