Ethereum gas fees have plummeted to their lowest level in six months, signaling a potential altcoin rally. Gas fees, which are paid to process transactions on the Ethereum blockchain, historically peak around market tops and fall during market bottoms. The low fees may indicate a future uptick in Ethereum network activity and increased demand for altcoins, which are cryptocurrencies that are not Bitcoin or Ethereum.
Ethereum Gas Fees Plunge to Six-Month Low, Signaling Potential Altcoin Rally
Amidst a slight uptick in the price of Ether (ETH), gas fees on the Ethereum network have plummeted to a six-month low, potentially foreshadowing an impending altcoin rally. This observation comes from analysts at crypto analytics platform Santiment, who assert that gas fees have historically been a reliable indicator of market sentiment.
"Traders tend to alternate between 'To the Moon' and 'It Is Dead' cycles, which can be reflected in transaction fees," Santiment notes. Typically, gas fees spike near market peaks and drop to "resting state" lows during market troughs.
The recent surge in gas fees on Ethereum in February was attributed to the heightened demand for the experimental token standard ERC-404. However, the current decline in fees suggests a potential resurgence in Ethereum network activity and a prelude to an altcoin rally.
"With markets largely retracing over the past six weeks, the diminished demand and pressure on the network could pave the way for an earlier turnaround in ETH and associated altcoins than anticipated," Santiment analysts propose.
In line with this hypothesis, the price of Ether has experienced a modest increase, climbing approximately 4.3% over the past week, according to CoinGecko data. Moreover, on April 27th, Ethereum layer-2 networks Optimism (OP), Arbitrum (ARB), and Polygon (MATIC) emerged as three of the top-performing assets among the top 50 cryptocurrencies by market capitalization, with gains of 11.7%, 3.5%, and 2.8%, respectively.
However, the reduced activity on the Ethereum network has led to a significant increase in the circulating supply of Ethereum, reaching its highest point in the past month. In the last 30 days, over 74,458 new ETH were issued, while only 57,516 were burned, resulting in a net increase of approximately 16,979 ETH.
This marks a reversal from the previous five months, which witnessed consistent deflation. Despite the recent uptick in ETH-based inflation, it is important to note that over 437,000 ETH has been burned since the network's transition to a proof-of-stake consensus mechanism, known as 'The Merge,' which took place on September 15th, 2022.
