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Santiment revealed that the average fee for transactions on the ETH network has been reduced to $1.12 per transaction
Ethereum is having its lowest drop in gas fees in three years. According to data released by Dune Analytics, the median gas fee was recorded to be 6.43 gwei, which was the seventh lowest the price has ever reached in a single day over the past three years. This low drop-in fee level suggests an easy and affordable transaction for Ethereum users, which could lead to a surge in ETH price.
Ethereum has continually been facing stiff competition from other Layer-1 blockchain solutions like Solana. However, the coin has been able to still establish dominance. In fact, despite the rise and strong competition from other platforms, ETH still tends to be the preferred choice for decentralized applications (dApps) and decentralized finance (DeFi) projects. However, the growing competition could be part of the possible network decongestion on Ethereum, resulting in lower gas fees.
Ethereum Gas Fees Drop, Potential Turnaround for ETH and Altcoins
In a report, Santiment, an on-chain analytics firm, revealed that the average fee for transactions on the ETH network has been reduced to $1.12 per transaction, which is the lowest average cost the coin has ever reached in a single day since October 18th.
🤑 #Ethereum's average fee level has dipped to just $1.12 per network transaction, the lowest average cost in a day since October 18th.
Traders historically move between sentimental cycles of feeling that #crypto is going "To the Moon" or feeling that "It Is Dead", which can… pic.twitter.com/8b8rLMLyIf
— Santiment (@santimentfeed) April 28, 2024
Santiment then went further to explain the relationship between transaction fees and market sentiment, stating that traders typically trade between two “sentimental cycles of feeling”, which are either an optimistic feeling that crypto is going to the moon or a pessimistic feeling referred to as “it is dead”. This sentiment is reflected in transaction fees, they tend to rise around market tops when optimism is high and then drop when the market bottoms.
The analyst went further by giving a positive view of the market, stating that the market has been experiencing a retracement over the past six weeks; hence, the reduction in transaction fees implies a lack of demand and reduced strain on the ETH network, which could potentially be a catalyst for a quicker turnaround for Ethereum and other associated altcoins than many anticipate.
Ethereum Price Struggles Despite Fee Drop
The reduction in transaction fees had a sharp short-term effect on the ETH price. The coin managed to reach above $3,300 yesterday, for the first time since mid-April. However, it was unable to maintain the bullish momentum as the bears pushed the price back to $3,200 at the end of the day. At the time of writing, ETH has continued to plummet, dropping to $3,100.
ETH has been having somewhat sideways but rising price action, with its price reaching a local bottom in mid-April, triggering a slow but steady price increase. So far, the news has not had a major effect on the price. However, we could see some long-term effects.
When transaction fees are low and a network becomes less congested, we expect to see more users and developers rush into such an ecosystem to build more solutions. If Ethereum is able to maintain these low gas fees with a less congested blockchain, then it is a no-brainer to expect long-term bullish spikes for the coin.
