Ethereum (ETH) Daily Transaction Fees Fall to Lowest Level Since September 2024

The network's native cryptocurrency, Ether (ETH), has also disappointed investors over the past year, failing to reach new highs alongside Bitcoin

Daily transaction fees on the Ethereum network fell to their lowest level since September 2024 on Feb. 8, generating only $731,472 in revenue over the past 24 hours, Token Terminal data shows.

This marks the first time in five months that daily revenue dropped below $1 million. The last time a similar slump occurred was from Aug. 17 to Sept. 8, 2024, when the network failed to surpass the $1 million threshold in multiple days. Prior to that, the last time daily fees dropped below $1 million was in November 2020.

Ethereum daily transaction fees hit a new low on Feb. 8. Source: Token Terminal

The new low in daily transaction fees comes as a blow to the Ethereum network, which has been struggling to generate revenue following the approval of spot exchange-traded funds (ETFs) in major markets like the United States and Hong Kong.

While Bitcoin price has reached new highs in 2024 thanks to the ETF approval, Ether (ETH) has largely disappointed investors throughout the past year. One key factor weighing on Ether’s performance may be its rising supply.

Since April 2024, ETH supply has been steadily increasing, reversing the deflationary period introduced by the Merge in September 2022. As a result, Ethereum’s total supply has now surpassed pre-Merge levels.

Ethereum supply reclaims pre-Merge levels. Source: Ultrassound.money

The Merge shifted Ethereum from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism, eliminating the network’s mining-based issuance which previously had a high supply inflation rate.

However, the London hard fork in August 2021 introduced a mechanism that burns a portion of transaction fees. When network activity is high, burned ETH can surpass newly issued ETH, making the asset deflationary.

Relative changes in newly minted ETH vs. burned ETH post-Merge. Source: Watch the Burn

Layer-2 networks reduce Ethereum activity

As part of its scaling strategy, Ethereum has shifted a significant amount of activity to layer-2 networks, which are designed to handle transactions off the mainchain and reduce congestion and fee spikes.

However, this strategy has also raised concerns about a potential fragmentation in the Ethereum ecosystem, as these layer-2 networks still face interoperability issues.

In the meantime, competitor networks have been gaining ground in the cryptocurrency industry. Tron is growing as a preferred network for stablecoin transactions, while Solana has emerged as a rising DeFi hub, especially within the memecoin market.

Both Tron and Solana have edged out Ethereum in total fees generated over the past three months, according to Token Terminal data.

Total fees generated on Ethereum, Tron and Solana over Q4 2023 – Feb. 8, 2024. Source: Token Terminal

Beyond onchain factors, internal conflicts within the Ethereum Foundation have also cast uncertainty over the network.

In January, Ethereum co-founder Vitalik Buterin took sole authority of the foundation’s leadership amid criticism of executive director Aya Miyaguchi and concerns over researchers’ paid advisory roles at EigenLayer, a project that aims to build a new Ethereum rollup.

But Ethereum bulls seem to be accumulating the asset despite the internal conflicts and onchain trends, with accumulation addresses adding 330,705 ETH ($833 million) on Feb. 7 — the largest single-day inflow ever recorded, according to CryptoQuant.