Ethereum Gas Fees Reach Historic Lows Amid Dencun Update

• Ethereum network transaction fees have reached a new milestone by recording historically low levels.
• The average daily gas fee on the Ethereum network dipped to just 2.9 Gwei over the weekend, marking the lowest point ever seen.
• The average daily fees in dollar terms also plummeted to $0.85, reaching the lowest levels in the past few years, subsequently reducing the average daily burn rate to just 115 ETH.

Ethereum network enjoys record low transaction fees, but the implications for investors remain uncertain.

Ethereum Transaction Fees Hit Record Lows

Ethereum’s network has achieved remarkably low transaction fees recently, setting a new record. Over the past weekend, the average gas fee on the Ethereum blockchain dropped to an unprecedented 2.9 Gwei. Additionally, the daily average fee in dollar terms has decreased to $0.85, a level that hasn’t been observed in several years. Consequently, the average daily ETH burn rate also fell dramatically to merely 115 ETH.

Potential Impact of Lower Fees on Investors

While lower transaction fees are advantageous for network users, the scenario appears more complex for investors. According to analyses from CryptoQuant, this drop in fees correlates with the Dencun update activated on Ethereum on March 13. The update introduced a new transaction type known as ‘Blobs,’ enabling Layer 2 networks such as Arbitrum, Base, and Optimism to publish their data on Ethereum with significantly reduced costs, cutting fees by up to 100%. Yet, the shift of Ethereum’s usage towards these Layer 2 networks could potentially lead to concerns about user and liquidity fragmentation.

ETH Price Struggle Despite ETF Approvals

Since the Dencun update, even though Ethereum ETFs have been approved, ETH’s price continues to face downward pressure. Ethereum’s supply has increased by over 197,000 ETH (valued at more than $500 million), resulting in a 35% drop in ETH’s price. These developments raise questions about the long-term implications of low fees for investors within the Ethereum ecosystem.

Conclusion

While the Ethereum network currently benefits from record low transaction fees, the broader implications for investors are yet to be fully understood. With Layer 2 networks gaining traction and concerns about potential liquidity fragmentation, stakeholders in the Ethereum ecosystem must carefully monitor evolving dynamics. As the situation progresses, maintaining a balance between user benefits and investor confidence will be crucial.