Ethereum Gas Fees Reach New Low as ETH Price Struggles

Ethereum gas fees have recently dropped to their lowest level in five years, even as ETH's price struggles to show gains.

A new report from Kaiko discusses this decline and its possible effects on Ethereum’s value. Despite the introduction of Spot Ether ETFs in the US, Ethereum has experienced significant volatility.

According to Kaiko, Ethereum’s gas fees have fallen to a five-year low. This decrease is largely due to the increased use of Layer 2 solutions and the March Dencun upgrade.

The Dencun upgrade introduced features like ‘Blobs,’ which have greatly lowered transaction costs for Layer 2 networks. As a result, networks such as Arbitrum and Base can now post data on Ethereum more cost-effectively.

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While the lower gas fees may seem beneficial, they come with a downside. The reduction in transaction fees means less ETH is burned, which leads to a rise in the overall supply of Ethereum. Since April, this increase in supply has been steady, raising concerns about its potential negative impact on Ethereum’s price.

Historically, Ethereum has experienced significant fluctuations in gas fees, particularly during the DeFi boom of 2021-22. The current decline in fees is part of a broader trend of decreasing network costs due to technological advancements. However, the growing supply amid factors like the Spot Ether ETF may dampen Ethereum’s price gains in the short term.

Alexander Stefanov