Ethereum and Bitcoin Transaction Fees Plunge to Multi-Month Lows Despite High Network Activity

In an unexpected twist, Ethereum and Bitcoin are experiencing a notable decline in transaction fees, reaching multi-month lows despite maintaining high network activity.

In a surprising turn of events, Ethereum and Bitcoin are experiencing a notable decrease in transaction fees, reaching multi-month lows despite maintaining high network activity. This development comes during one of the most challenging weeks for the broader crypto market in 2024, marked by Bitcoin falling below $63,000 and many altcoins experiencing double-digit losses.

Ethereum’s Gas Fees Drop Significantly

Ethereum's gas prices, the fees required for conducting transactions on the network, have decreased significantly. The average gas price recently stood at just 7.3 Gwei, a dramatic drop from the 98.68 Gwei recorded on March 5. This decline makes the Ethereum network more affordable for developers and users alike, especially given the high level of network activity.

The reduction in Ethereum gas fees can be attributed to the increased adoption and efficiency of Layer 2 (L2) solutions. These protocols enhance Ethereum’s scalability by processing transactions off the main Ethereum chain, reducing congestion and costs. Data from L2Beat indicates that on June 21, Ethereum Layer 1 and Layer 2 protocols recorded an average of 299 transactions per second.

According to Brian Smocovich, founder of Pistachio Fi, “The L1 gas market is now more efficient because most volume is on L2s, L2 -> L1 settlement is 100x cheaper than pre-4844, and we have the gas market efficiencies of EIP-1559.” This efficiency is evident in the reduced cost of everyday transactions, such as performing a swap on Uniswap now costing just $1.06, trading an NFT on Seaport at $1.49, and transferring ETH on-chain at only $0.23. Using L2 networks like Base, which incorporates “blob” transactions, reduces these fees even further, with a Uniswap swap on Base costing just $0.0016.

However, the dramatic reduction in gas fees has also led to a decrease in Ethereum’s burn rate, now at a 12-month low. Consequently, Ethereum's supply has become slightly inflationary, with a growth rate of around 0.56% per year, according to ultrasound.money.

Bitcoin Transaction Fees Reach Lowest Level Since October 2023

Bitcoin is experiencing a similar trend, with transaction fees reaching their lowest level since October 2023. Recent data indicates that the average Bitcoin transaction fee is $1.94. This is a significant decrease from the fee spikes often seen during periods of high market volatility or price appreciation.

Historically, every major bullish period since 2012 has typically resulted in a corresponding fee increase, except for the 2021 bull run. Bitcoin’s price touched $69,000 during that period, but transaction fees remained relatively low.

The current low-fee environment for Ethereum and Bitcoin comes during significant turbulence in the broader crypto market. Bitcoin’s price has fallen below the $63,000 support level, while many altcoins have seen double-digit percentage losses. This downturn has led to billions in liquidations from leveraged positions, with spot holders also incurring heavy losses.

Market Implications of Low Transaction Fees

Despite the market turmoil, the low transaction fees on both networks represent a silver lining for users and developers. Lower fees make these blockchain networks more accessible and cost-effective for various applications, ranging from decentralized finance (DeFi) to non-fungible tokens (NFTs).

This trend could have several implications for the future. For Ethereum, the success of Layer 2 solutions highlights their critical role in easing network traffic and lowering gas prices. This could drive further adoption and innovation within the Ethereum ecosystem. For Bitcoin, the low transaction fees amidst a market downturn suggest a possible shift in user behavior or network dynamics, potentially leading to a more stable fee environment in the future.

As the crypto market continues to evolve, the interplay between transaction fees, network activity, and market conditions will be a key area to watch. Lower fees could spur increased usage and adoption, contributing to the long-term growth and stability of both Ethereum and Bitcoin.

News source：https://www.kdj.com/cryptocurrencies-news/articles/ethereum-bitcoin-transaction-fees-plunge-multimonth-lows-network-activity.html

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