Ethereum transaction fees have slumped to levels last seen in July 2021 amidst a wider crypto market sell-off.
According to data by Bitinfocharts, the average transaction fee on the network as of May 29 was $3.77. Today, June 1, that has gone up to $6.16. However, this is still low considering that that value stayed in the $36-$54 range when the year began.
Usually, Ethereum’s transaction or gas fees are symbolized in gigawei (“Gwei”). Users who wish to transact on the network have to pay a small fee which can surge if the network gets overloaded. Earlier last month, the average transaction fees exploded to $196 following an implosion of the Terra ecosystem.
In context, the abrupt surge in gas fees was caused by users transferring more Ethereum-based stablecoins including tether (USDT) and Circle’s USDC following the TerraUSD(UST) depeg causing too much congestion on the network. Today, despite the market slowing down NFTs still command 30% to 45% of daily Ethereum gas consumption and transaction counts on-chain.
According to Santiment, the extremely low fee levels could be an indication of very minimal activity on the Ethereum network. It could also denote stagnancy and fear by users, meaning that “no one is interested in doing anything.” However, historically (but doesn’t mean automatically) $ETH prices rise after average transactions dip below $5.
That said, despite the current low gas fees, Ethereum’s fee problems seem to still be far from over. The continued deferrals of the merge continue to jeopardize the network’s transactional appeal, giving an upper hand to rival blockchains such as Cardano, Solana, and Avalanche.
As ZyCrypto reported, Ethereum’s gas fee and high energy consumption problems are expected to be solved through sharding after the merge. However, it is quite hard to tell when the proof of stake iteration will take place given that the network’s developers have continued to give conflicting dates. However, in recent reports, Tim Beiko and Vitalik Buterin have suggested August to be the month when Eth 2.0 will hit mainnet.