Ethereum Fees Drop 90% as Transaction Volumes Decline
2min read Ethereum network fees have plummeted to their lowest point in five years, coinciding with a significant decrease in transaction volumes. According to the onchain analytics platform Santiment, the current average fee per transaction on the Ethereum network stands at approximately $0.168. This reduction in fees is directly linked to the lower number of users sending Ether (ETH) and interacting with smart contracts on the blockchain.
Brian Quinlivan, the marketing director of Santiment, explained the dynamics behind this fee reduction. When there is high activity on the Ethereum network, users compete by bidding higher fees to ensure their transactions are processed quickly, driving up the average cost. Conversely, during periods of lower activity, users do not need to bid as high, resulting in a drop in average fees. This mechanism is essentially a supply and demand system, where the cost of transactions fluctuates based on the level of network usage.
From a trading perspective, low fees can potentially hinder a price rebound, as traders may be more cautious in their activities. However, Quinlivan noted that traders are currently adopting a wait-and-see approach, holding off on increasing their transaction frequency until global economic uncertainties subside. This cautious stance is likely influenced by the broader market conditions, which have been volatile since the announcement of sweeping tariffs by US President Trump on April 2. Many assets, including Ethereum, have yet to recover to their pre-tariff levels despite some exemptions and a temporary pause on tariffs for most countries.
Ethereum's price has declined by over 12.5% in the past two weeks and has remained relatively stable over the past 24 hours, trading just below $1,600. The market's sensitivity to economic news and tariff discussions has been evident, with prices testing long-time support levels. Quinlivan suggested that as the retail community's interest in Ethereum wanes, there is a higher likelihood of an eventual surprise rebound with minimal resistance, given the asset's ongoing development.
In related news, the Pectra upgrade for the Ethereum network is scheduled to go live on the mainnet on May 7, following delays due to configuration issues and an unknown attacker during the Holesky and Sepolia testnet activations. The first phase of the Pectra upgrade aims to double the layer-2 blob capacity from three to six, reduce transaction fees and network congestion, and enable fees to be paid in stablecoins such as USDC and DAI. Additionally, the maximum staking limit will be increased from 32 ETH to 2,048 ETH.
The second phase of Pectra, expected in late 2025 or early 2026, will introduce a new data structure to enhance data storage efficiency and a system that improves scalability by allowing nodes to verify transaction data without storing the entire dataset. This upgrade follows the network's Dencun upgrade in March 2024, which significantly reduced transaction fees for layer-2 networks and improved the economics of Ethereum rollups. The Pectra fork is anticipated to further enhance the network's capabilities and efficiency, addressing some of the current challenges faced by the Ethereum ecosystem.
