2024-04-30
According to data provided by on-chain analytics firm Santiment, the average transaction fee on the Ethereum network has recently reached its lowest levels.
Transaction fees on Ethereum refer to the amount that senders must include with their transactions as compensation for the blockchain to process them.
The fee required for a swift transaction depends on the network conditions at any given time.
During periods of high activity, there is increased competition to have transactions processed quickly, which may require users in a hurry to pay higher fees to bypass congestion.
As a result, average transaction fees tend to be high during congested periods and low during periods of low activity.
This relationship provides insight into the current demand among users to utilize the Ethereum network.
The graph below illustrates the changes in average transaction fees on the Ethereum blockchain over the past year:
As depicted in the graph, Ethereum's average transaction fees experienced a surge alongside the cryptocurrency's rally this year, reaching a peak of $15.21 last month. Interestingly, this fee peak coincided with the asset's price peak.
The analytics firm notes that traders often exhibit cycles of sentiment, oscillating between believing crypto is "going to the moon" or thinking it is "dead." These sentiments can be observed through transaction fees.
Historically, the market has moved contrary to the expectations of the majority.
Therefore, periods of high fees, accompanied by fear of missing out (FOMO), often precede price tops. The pattern observed last month aligns with previous observations.
Following this peak, Ethereum's transaction fees and price experienced a drawdown, as shown in the chart.
Recently, the fees have continued to decrease, reaching a low of just $1.12.
This represents the lowest fee level observed on the network since October of the previous year.
Just as high fees can indicate price tops, low demand may lead to price bottoms for the cryptocurrency.
Santiment suggests that with the market retracing over the past six weeks, the lack of demand and strain on the network could potentially turn Ethereum and associated altcoins around sooner than expected.
Yesterday, Ethereum briefly recovered to a high of $3,350, but it has since retraced and is currently valued at $3,170.
