The Ethereum transaction fees have significantly decreased as the cryptocurrency’s price has dropped. Recent data shows that users are now paying a base fee as low as 0.82 Gwei, indicating reduced activity on the Ethereum network.
Rapid Decline In Ethereum Base Fees
Data from Ultra Sound Money reveals that Ethereum’s base gas fee has steadily decreased, reaching a multi-year low of 0.82 Gwei on Saturday, August 11. The drop in gas fees is linked to fewer large transactions on the network. On-chain data from IntoTheBlock shows a significant decrease in transactions exceeding $100,000 from 16,990 to 2,620 within the week.
The reduction in gas fees has led to a decrease in the amount of ETH being burned. This is because the base fees paid by users are burned to create deflationary pressure on the ETH supply. Ultra Sound Money data indicates that only 3,698 ETH tokens were burned in the last seven days, while 18,065 new ETH tokens were issued, causing an increase in the circulating supply of Ethereum.
Why Do Gas Fees Matter?
The relationship between gas fees, network activity, and ETH supply is crucial for traders. Gas fees on Ethereum are directly related to network activity. Increased transactions lead to higher demand on validators for processing. Hence, when the network is congested with a high volume of transactions, users have to pay higher fees for faster processing of their transactions.
Historically, elevated gas fees, while inconvenient for users, indicate increased interest and activity on Ethereum. Such high-demand periods often coincide with bullish market trends. In May 2022, users paid an average daily gas price of $196.638 at its peak.
During low activity periods like the current one, reduced demand leads to lower gas fees. While this benefits users seeking to save on transaction costs, it also reflects sluggish network activity. Ethereum’s current trading price is $2,585, down 3.58% in the last 24 hours.
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