Ethereum (ETH) is currently experiencing a substantial decline in network transaction fees, reaching its lowest point in the past six months. As the price of the main network asset, ETH, saw a slight increase over the weekend, analysts are now speculating about a potential surge in altcoins. Santiment, a crypto analysis platform, revealed that the average fee for an Ethereum transaction dropped to $1.12 on April 27, which is a significant decrease as stated in Santiment’s latest post.
Santiment’s analysis suggests that changes in Ethereum network transaction fees often reflect shifts in market sentiment. Peaks in fees are usually associated with local market highs, while declines may indicate market lows. Therefore, the recent drop in transaction fees could be a signal of an upcoming revival in Ethereum’s network activity and potentially mark the beginning of a rally in altcoins.
Transaction fees had reached their highest level in eight months in February, mainly due to increased interest in an experimental token standard called ERC-404. However, the current decline in fees indicates a notable change in demand dynamics and could potentially lead to an earlier than expected resurgence in ETH and other related altcoins.
CoinGecko’s data shows that this development coincided with a modest 4.3% increase in ETH’s price over the past week. Furthermore, leading Ethereum Layer 2 solutions like Optimism, Arbitrum, and Polygon were among the top five best-performing altcoins in the top 50 cryptocurrencies by market value on April 27, demonstrating their remarkable performance.
On the other hand, despite a decrease in network activity last month, there was a significant increase in Ethereum’s circulating supply. Ultrasound.money’s data reveals that 74,458 new ETH were issued, while only 57,516 units were burned. This resulted in a net increase of 16,979 ETH in the supply over the last 30 days, which sharply contrasts with the steady deflation trend observed over the past five months.
Despite the recent increase in ETH-based inflation, the Ethereum network has experienced significant coin burning activity since the transition to the Proof of Stake (PoS) consensus mechanism known as The Merge in September 2022. Over 437,000 ETH have been burned since this transition, effectively removing them from circulation and demonstrating a strong effort to manage and stabilize the network’s supply dynamics.
Disclaimer: The information provided in this article is not intended as investment advice. Investors should be aware of the high volatility and risks associated with cryptocurrencies and conduct their own research.
