Ethereum (ETH) Price Drops 55% from Its December High, Transaction Fees Hit 4-Year Lows

Ethereum is facing a tough time as its price has dropped 55% from its December high of $4,000 to below $1,800. This sharp decline has made it one of the weakest performers

The price of Ethereum (ETH) has dropped 55% from its December high of $4,000 to below $1,800, making it one of the weakest performers among major cryptocurrencies.

At the same time, transaction fees on the Ethereum network have hit a four-year low, sparking discussion about whether this is a sign of reduced network activity or a potential setup for a market rebound.

According to recent data from Glassnode, Ethereum transaction fees have dropped to their lowest levels in nearly four years. Credit: Glassnode

According to recent data from Glassnode, Ethereum transaction fees, also known as ‘gas fees,’ have dropped to their lowest levels in nearly four years.

Transaction fees on the Ethereum network fell to $1.36 on March 15, the lowest since November 2019, signaling a significant reduction in the cost of transactions.

This sudden decline has caught the attention of the crypto community, as lower fees make transactions more affordable for users. For retail investors, who often avoid Ethereum due to high gas costs, this could be an opportunity to re-enter the market.

However, at the same time, lower transaction fees could also indicate lower activity on the Ethereum network.

As of mid-March, daily active addresses on the Ethereum network fell to 461,000 from 717,000 earlier this year, according to Santiment. This marks the lowest level of network activity since June 2023.

Lower Transaction Fees Despite Higher Gas Prices

Despite lower transaction fees, the price of gas, which measures the cost of performing a single step in a smart contract, has actually increased from 20 to 25 units in recent weeks.

This anomaly is surprising, as lower gas prices are usually accompanied by lower transaction fees, and vice versa.

Another factor contributing to lower transaction fees is the growing sell pressure from long-term holders.

According to data from Realized Value, Ethereum’s realized cap HODL wave has hit its lowest point since August 2023, showcasing increased sell pressure from long-term holders.

Also, layer-2 solutions like Arbitrum, Base, and Optimism are becoming increasingly popular due to their lower fees and faster speeds compared to Ethereum’s mainnet. These layer-2 chains offer faster transaction times and lower fees, making them an attractive alternative for users.

As layer-2 solutions gain traction, they could reduce the demand for Ethereum’s mainnet, which in turn could lower transaction costs even further.

If demand keeps decreasing, it could affect Ethereum’s position in the crypto market in the long term.

Ethereum Price Outlook

The price of Ethereum struggled to stay above the $2,050 level and dropped below the $1,850 zone, showing signs of weakness.

Now, the price is consolidating, facing immediate resistance at $1,850. A breakthrough above this level could lead to a recovery towards $2,000.

Key technical indicators, such as the Relative Strength Index (RSI) at 37, suggest that bearish momentum is gradually diminishing.

Additionally, the Stochastic Oscillator (Stoch) on the 14-period setting has entered the overbought zone, which could indicate a potential short-term pullback from the recent price decline.

As of now, the price of Ethereum stands at $1,852, showing a rise of 2.81% over the past 24 hours. However, over the past week, the token's price has decreased by 12%, highlighting the ongoing pressure in the market.

For ETH to regain strength, it needs to break above the $2,000 and hold that level.