Ethereum (ETH) Network Activity Drops to 2020 Levels as Transaction Fees Hit All-Time Lows

Transaction fees hit all-time lows, weakening Ethereum's deflationary model and increasing inflation risks.

Ethereum's network activity has dropped to 2020 levels as transaction fees hit all-time lows, crypto analyst EgyHash observes. This inactivity is affecting the burning mechanism and increasing inflation risks.

Transaction Fees Hit All-Time Lows As Network Activity Fades

According to EgyHash's analysis, Ethereum's network activity is gradually slowing down, pushing the asset into a difficult position. Compared to Bitcoin, Ethereum's performance has dropped to levels not seen since 2020, putting it on the brink of a 91% crash, as per crypto analyst Ali Martinez.

This inactivity is mainly attributed to the declining number of active addresses, which has been dropping steadily since the start of the year. As a result, transaction fees are also decreasing. According to on-chain data, both the average fee per transaction and block have hit all-time lows.

This development could have significant implications for Ethereum's ecosystem. Transaction fees are a crucial part of Ethereum's deflationary model, as they are burned to reduce the overall token supply. However, with transaction fees hitting all-time lows and network activity slowing down, the burning mechanism has weakened considerably.

Moreover, this inactivity is unfolding amid a period of strong selling pressure, particularly from Ethereum whales. In just two weeks, whales have dumped 760,000 ETH, valued at about $1.42 billion.

This activity has also seen a decrease of 63.8% in the last five weeks, signaling major trouble. If this trend continues, it could lead to a massive sell-off and more price pain for the altcoin.

Impact of the Dcun Upgrade

The burning mechanism is crucial for controlling inflation and maintaining the value of the token. However, with transaction fees at record lows and network activity at 2020 levels, the burn rate has hit its lowest level since Ethereum transitioned to proof-of-stake with the merge in September 2022.

According to EgyHash, this situation is making it difficult for Ethereum to maintain its value. For a recovery, network activity and transaction fees must rise. However, if inflation continues to exceed demand, then Ethereum's price could remain under pressure.

Ethereum's 91% Crash Warning

In another analysis, crypto analyst Ali Martinez has warned of a potential Ethereum crash against Bitcoin. According to Martinez, if the ETH/BTC chart is flipped upside down, it shows a double-top pattern—a classic bearish signal that often leads to a sharp fall.

From this angle, the $ETH / $BTC trading pair could be heading to 0.0020 !pic.twitter.com/6kbCwP5krT

He claims that if this pattern plays out, then ETH/BTC could tumble to 0.0020 BTC. Currently, Ethereum is trading at 0.02153 BTC ($1,766), meaning such a drop would be a devastating crash for the asset.

However, technical analysis suggests that if Ethereum manages to hold above the $1,800 support level and begins a recovery, similar to Bitcoin, it could push past the $1,900 and $1,950 resistance zones.

But if it falls below $1,800, it could continue down to test the next support at $1,700 and potentially lower levels.