Ethereum (ETH) Gas Fee Plummets to Four-Year Low Following Dencun Upgrade: Impact Analysis

• The Dencun upgrade has significantly reduced Ethereum’s gas fee, but it has also decreased the amount of ETH burned, making the network inflationary again.
• Despite the drop in gas fees, Ethereum’s price is facing selling pressure, slipping to $2,900.
• Experts believe that unless there’s a significant increase in network activity, Ethereum is unlikely to return to a deflationary state.

The Dencun upgrade has made Ethereum inflationary again, with gas fees dropping to levels last seen in 2020. However, this has also led to a significant decrease in the amount of ETH burned, raising concerns about the network’s future.

Ethereum Gas Fee Hits Four-Year Low

Following the Dencun upgrade, the average gas fee on Ethereum has dropped to its lowest level in four years, currently standing at 6.8 Gwei. This has made on-chain operations such as cross-chain bridging, asset swaps, and NFT minting more affordable for users. However, this has also resulted in a significant decrease in the amount of ETH burned, making the network inflationary again.

Impact of the Dencun Upgrade

The Dencun upgrade has successfully decoupled Ethereum’s transaction fees from network activity, ensuring that fees remain low even during times of increased usage. However, this has also led to a decrease in the amount of ETH burned, making the network inflationary again. According to a report by CryptoQuant, the Ethereum network has experienced a decrease in transaction fees following the Dencun upgrade, and the amount of ether burned has reached one of its lowest levels since the Merge.

Ethereum Price Continues to Face Selling Pressure

Despite the drop in gas fees, Ethereum’s price continues to face selling pressure, slipping to $2,900. The ETH/BTC pair has breached its support level of 0.05, a pattern often signaling a forthcoming price decline. Should the ETH/BTC pair dip below 0.04, analysts anticipate Ethereum’s price potentially plummeting to approximately $2,500.

Conclusion

While the Dencun upgrade has made Ethereum transactions more affordable, it has also made the network inflationary again. Unless there’s a significant increase in network activity, Ethereum is unlikely to return to a deflationary state. As such, investors and users must keep a close eye on Ethereum’s network activity and price movements in the coming months.