Ethereum's Plummeting Gas Fees Hint at Upcoming Altcoin Rally

Ethereum's transaction fees have reached their lowest point in six months, with an average of $1.12. This decline coincides with a slight uptick in ETH's price and could indicate a potential altcoin rally. The drop in gas fees aligns with historical trends, typically peaking during market highs and decreasing during lows. Despite an increase in circulating supply due to more ETH issuance than burning, the Ethereum network has experienced significant activity growth in 2024, driven by the surge in DeFi.

Ethereum's Plunging Gas Fees Signal Potential Altcoin Rally

Key Findings

• Ethereum transaction fees have plummeted to their lowest point in six months.
• Lower gas fees, coupled with a market dip, suggest a potential recovery for Ethereum and altcoins.
• Despite increased supply, Ethereum's network activity has surged due to DeFi growth.
• Analysts anticipate a potential altcoin rally triggered by reduced gas fees.

Gas Fees Hit All-time Lows

Ethereum's gas fees have descended to their lowest levels in six months, aligning with a modest uptick in Ethereum's price. The average transaction fee has fallen to a mere $1.12, according to the crypto analytics platform Santiment.

Santiment interprets this decline as a potential indicator of an impending altcoin rally. Gas fees tend to fluctuate with investor sentiment, reaching peaks during market highs and bottoms during market lows.

Market Retracement and Network Respite

The recent market correction, along with decreased network demand, could facilitate a faster-than-expected recovery for Ethereum and related altcoins, notes Santiment. Ethereum's price has witnessed a 4.3% increase over the last week.

Layer-2 Networks Surge

Notably, three Ethereum layer-2 networks - Optimism (OP), Arbitrum (ARB), and Polygon - have emerged among the top five best-performing assets within the top 50 cryptocurrencies by market capitalization. These networks have posted impressive gains, ranging from 2.8% to 11.7%.

Circulating Supply Increase

However, the downturn in network activity has resulted in an increase in Ethereum's circulating supply. Over the past month, 74,458 new ETH were issued, while only 57,516 were burned, leading to a net supply increase of 16,979 ETH. This contrasts with the deflation witnessed in recent months.

Ethereum's Proof-of-Stake Transition and DeFi Surge

Ethereum transitioned to a proof-of-stake consensus mechanism in September 2022, aiming to reduce the overall supply and increase its value. Since then, over 437,000 ETH have been burned.

Despite the circulating supply increase, Ethereum's network activity has flourished due to the surge in decentralized finance (DeFi) applications. In the first quarter of 2024, Ethereum's network revenue reached $365 million, representing a 155% year-on-year growth.

The increase in network activity has driven Ethereum's average daily transactions to surpass last year's figures, currently standing at 1.15 million. This is approaching the peak levels observed during Ethereum's significant run in 2021.

Implications for Altcoins

Analysts speculate that the drop in gas fees, coupled with Ethereum's network breather and the surge in layer-2 networks, could trigger an altcoin rally. Lower gas fees make it more affordable for users to interact with Ethereum applications, potentially stimulating activity and driving up the prices of related altcoins.

About the Author

Teuta Franjkovic is a seasoned writer and editor with over 15 years of experience. She specializes in covering macroeconomics, technology, cryptocurrency, and blockchain. Her expertise has been featured in various publications, including Forbes, Bloomberg, CoinTelegraph, and CoinSpeaker.

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