The amount of Ethereum needed to process transactions has dropped 94% since January.
The low gas fees on Ethereum result from less demand for block space.
Historical patterns indicate that when the median cost of using the Ethereum network reaches record lows, the price of Ethereum often increases.
Gas fees on Ethereum have reached lows not seen in over nine months. While decreasing network activity is the main reason for the decline, the number of unique active users on Ethereum remains stable.
Ethereum Activity DecreasesThe cost of using Ethereum is reaching record lows.
According to the data analytics site Nansen, gas fees hit a low of 10 gwei today. Average transaction costs have come in at 12 gwei over the last few days, which equates to roughly $0.67 for peer-to-peer ETH transfers. To put that figure into perspective, in January, average gas costs on Ethereum were as high as 218 gwei, revealing a 94% drop in the amount of Ethereum needed to process transactions.
The decline in gas fees on the network is due to decreasing demand for Ethereum block space. Because blocks only contain a finite amount of space for transactions, during periods of high congestion, users bid up the price they are willing to pay to have their transactions processed in the next block. However, when activity decreases, the network lowers the amount of gas needed to reflect demand.
The NFT marketplace OpenSea, which has consistently been one of the biggest gas users on the Ethereum network over recent months, has seen activity decline in recent weeks. According to data from token terminal, OpenSea handled $67.5 million worth of transactions on Mar. 13, a 70% decline from peak February levels.
OpenSea is not the only Ethereum application to see a decrease in activity. Uniswap, the most popular decentralized exchange on Ethereum, has seen a steady decline in transactions since last November. On Mar. 12, the exchange hit a new multi-month low in trading volume of $799 million. In comparison, the exchange handled a colossal $8.8 billion worth of transactions over a 24-hour period at its peak on Nov. 10.
Despite the shrinking demand for Ethereum block space, the number of wallets actively using the network does not appear to be decreasing. According to data from Messari, the amount of unique active Ethereum addresses has stayed consistently above 500,000 and has not capitulated to the lows observed during the summer of 2021.
Ethereum unique active addresses (Source: Messari)As the number of unique active users on Ethereum remains constant, it implies that users are still transacting on the network, only less frequently than before.
For many Ethereum power users, the low gas fees likely come as a blessing. As network transactions are now cheaper, traders are able to take advantage of smaller arbitrage opportunities, thus improving capital efficiency. The low gas fees will also be seen as a welcome relief for more casual users. The cost of buying and listing NFTs on platforms like OpenSea has also become significantly cheaper. Users who had pending airdrops or staking rewards to collect will be able to do so without eating into their profits as much as they would have done when fees were at record highs.
While gas fees are low, they won’t necessarily stay that way for long. Looking at historical patterns, whenever the median cost of using Ethereum reaches record lows, it often jumps back up due to the price of Ethereum increasing. Whether a similar event will play out soon remains to be seen.
Disclosure: At the time of writing this piece, the author owned ETH and several other cryptocurrencies.
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
What is a Crypto Airdrop: Why Projects Airdrop Crypto
Crypto airdrops occur when new tokens are freely distributed to different wallets in order to drive initial growth and build a community. They represent a popular marketing tactic that new projects use to spread…
Ethereum Hints at Recovery From Market Slump
The Ethereum network appears to be gaining the activity it needs for a price recovery. Still, Ethereum is yet to see a steady increase in new addresses to support the…
10M ETH Staked in Ethereum Consensus Layer Contract
Mar. 10, 2022
The Ethereum consensus layer deposit contract has surpassed 10 million in ETH staked. This represents roughly 8% of the entire Ethereum supply. Ethereum’s Roadmap Momentum surrounding Ethereum’s switch from Proof-of-Work…
OpenSea Saw a 646x Increase in Trading Volume in 2021
The NFT marketplace OpenSea has registered a colossal $14 billion in trading volume throughout 2021, far outpacing its 2020 performance of $21.7 million. OpenSea’s Breakout Year 2021 will go down…
Leave a Reply