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Ethereum Gas Fees Hit New Lows: Is a Market Surge on the Horizon?

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2024.08.31 MEXC
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According to the latest data from August 26, Ethereum network gas fees have dropped below 1 gwei over the past week, with the current average at 0.741 gwei, setting a new historical low. This change was first reported on August 12, 2024, when gas fees fell to 2 gwei, the lowest level in the past five years. Subsequently, on August 16, Ethereum's gas fees further decreased, with transaction costs fluctuating between 1.1 and 1.9 gwei, occasionally even falling below 1 gwei. This series of changes has attracted widespread attention and sparked discussions about the potential rise in Ethereum's price.


1. Ethereum Gas Fees Hit New Lows: Background and Drivers

Golden Finance reports that Ethereum's gas fees have recently reached a five-year low, thanks to increased Layer 2 activity and the Dencun upgrade in March, which reduced Layer 2 transaction costs. This reduction in fees impacts ETH because lower fees mean less ETH burned, thereby increasing the token supply. As a result, the total supply of ETH has been steadily rising since April. Despite demand-driven factors such as the spot ETH ETF, this growing supply could potentially dampen price increases in the short term.


As is well known, Ethereum's gas fees represent the transaction cost required to perform transactions or execute smart contracts on the Ethereum network. Gas fee fluctuations are typically influenced by the following factors:

  • Network Congestion: Gas fees generally rise during periods of network congestion. Recently, with the easing of Ethereum network congestion, gas fees have naturally declined. According to the latest data, Ethereum's transaction processing speed and network throughput have significantly improved, reducing network pressure.

  • Ethereum Upgrade: The Ethereum 2.0 upgrade plan is progressing gradually, with the implementation of EIP-1559 having a significant impact on gas fees. This proposal introduced a base fee mechanism that burns a portion of the transaction fees to stabilize gas costs and mitigate fee fluctuations during peak times.

  • Layer 2Solutions: Layer 2 scaling solutions, such as Rollups and sidechain technologies, are becoming more widespread. These technologies shift transaction processing off-chain, reducing the pressure on the main chain. The adoption of these technologies on the Ethereum network helps further lower gas fees.

2. How Industry Experts Interpret the Ethereum Gas Fee Plunge

Analysts believe that the decrease in Ethereum gas fees is partly due to the increased popularity of DeFi and meme projects, as well as the Dencun upgrade, which improved network efficiency and reduced gas fees. While industry experts have varying opinions on the significant drop in Ethereum gas fees, there is a consensus that this change is positive. Here are the analyses and insights from various perspectives on this phenomenon:

  • Industry Comments: Notable blockchain analyst Lark Davis points out that the decrease in gas fees indicates that the Ethereum network is becoming more efficient, which is good news for both users and developers. Especially during the boom in DeFi and NFT sectors, this reduction in fees will greatly stimulate market activity. He believes that lower fees will increase the network's usage frequency and attract more users and developers. BlockBeats also notes that recently, Ethereum's gas fees dropped to 0.6 gwei, with low-priority transaction fees costing only 1 gwei or less, which is extremely rare in recent years. This change has sparked discussions about Ethereum's future trends, but it's also important to be aware of potential challenges, such as user and liquidity fragmentation on the network.

  • Market Analysis: A leading trader from the well-known exchange MEXC notes that while the decrease in gas fees generally has a positive impact on price increases, investors should still consider other macroeconomic factors and market sentiment that affect price trends. They advise investors to take into account overall market trends and technological advancements. It is worth mentioning that MEXC, as a prominent trading platform in the industry, is renowned for its high-performance matching technology, industry-leading low trading fees, and the widest selection of cryptocurrencies.

  • Technical Expert Insights: Ethereum developer Vitalik Buterin recently mentioned that the reduction in gas fees is the result of their long-term efforts and has improved the usability of Ethereum. While short-term changes in fees may not immediately lead to dramatic price fluctuations, it undoubtedly sets a solid foundation for Ethereum's future development. He emphasized that technological advancements and network optimization are crucial factors in continuously driving the growth of the Ethereum ecosystem.

History shows that whenever Ethereum's gas fees fall to a low point, it often signals a price bottom in the mid-term. ETH prices typically experience a strong rebound after this cycle, and the current decrease in fees could support future price increases. Although lower gas fees are a positive sign, other economic factors and market dynamics also need to be considered in the analysis.

3. Potential Impacts of Lower Ethereum Gas Fees

The significant decrease in Ethereum gas fees has led to notable improvements in user experience and increased market activity. However, this change also comes with some challenges and potential risks:

  • Improvement in User Experience
The significant drop in Ethereum Gas fees directly reduces the cost of transactions and smart contract executions, greatly enhancing the user experience. According to Jinse Finance, CryptoQuant analyst EgyHash noted that Ethereum's daily average gas fee has fallen to a historical low of 2.9 gwei, equivalent to $0.85 USD. This reduction has significantly lowered the cost of participating in the Ethereum network and is expected to attract more users and developers, increasing the network's activity and usage frequency.

  • Revival of DeFi and NFT Markets
High Gas fees had previously constrained the development of Ethereum's decentralized finance (DeFi) and non-fungible token (NFT) markets. With the decline in gas fees, these sectors may experience a revival. Lower fees help reduce the cost of using DeFi protocols and stimulate trading activity in NFT projects, thereby driving demand growth in these markets. This trend could further boost the overall usage and demand for the Ethereum network, leading to broader market opportunities.

  • Changes in Market Expectations
The reduction in gas fees is often seen as a sign of improved network efficiency. This improvement may boost investor confidence in Ethereum's future development, thereby driving up Ethereum prices. Positive market expectations for Ethereum, especially in the context of continued network technological improvements and a general recovery in market sentiment, could positively influence prices. Investors should pay attention to the potential impact of this change on future price trends and use market analysis tools provided by platforms like MEXC to optimize their investment strategies.

  • Challenges and Risks
However, the decrease in Ethereum gas fees also presents several challenges. According to statistics, Ethereum's daily burn rate has dropped to a historical low of 115 ETH. This is related to the Dencun upgrade activated on March 13 this year. While lower fees benefit users, they may lead to a shift of Ethereum's usage to L2 networks, increasing the risk of user and liquidity fragmentation. Additionally, despite the approval of Ethereum spot ETFs, ETH prices have not significantly risen since the Dencun upgrade. During this period, the ETH supply increased by 197,000 ETH (worth over $500 million), while the price dropped by 35%.

Overall, the significant decrease in Ethereum gas fees has brought notable benefits to users and the market, including reduced costs and increased network activity. This improvement helps drive the recovery of the DeFi and NFT markets and enhances investor confidence in Ethereum's future. However, this change also presents some challenges, such as the shift of network usage to L2 solutions and the continued price stagnation. Therefore, while the short-term drop in gas fees has positively impacted the Ethereum ecosystem, investors should comprehensively assess the potential risks associated with these changes.

4. Do Lower Ethereum Gas Fees Signal a Major Price Surge?

Although the reduction in gas fees is a positive signal, it is not the only determinant of price increases. Investors need to consider the following factors:

  • Market Trends: Technical analysis and market trends remain crucial tools for predicting price movements. While the reduction in gas fees may impact market sentiment, overall market trends and other macroeconomic factors also need to be considered.

  • Technological Advances: The continuous development of Ethereum network technology, particularly the implementation of Ethereum 2.0 and Layer 2 solutions, will have a long-term impact on prices. Technological improvements can enhance network efficiency and attract more users and developers.

  • Market Sentiment: Market sentiment and investor confidence significantly affect short-term price fluctuations. While a decrease in gas fees may boost market sentiment, it's important to keep an eye out for any negative news or market events that could impact prices adversely.

5. Conclusion

The historical low in Ethereum gas fees not only demonstrates a significant improvement in network efficiency but also reflects a substantial reduction in transaction costs. This trend has a positive impact on the long-term health of the Ethereum network and user experience. However, despite the potential for low fees to drive up Ethereum prices, the actual trend needs to be considered in conjunction with overall market trends, technological developments, and market sentiment. Therefore, investors should thoroughly analyze the current market conditions and carefully assess potential risks and opportunities to make informed investment decisions.

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