Ethereum Fees Drop 90% as Transaction Volumes Decline

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 is 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 that when there is high activity on the Ethereum network, users compete by bidding higher fees to ensure their transactions are processed quickly. This competition drives up the average cost of transactions. Conversely, when fewer people are transacting, the need to bid high fees diminishes, leading to a drop in average transaction costs. This dynamic is essentially a supply and demand system, where the cost of transactions fluctuates based on the level of network activity.

From a trading perspective, low fees might hinder a price rebound, as traders are currently adopting a wait-and-see approach due to global economic uncertainty. The recent announcement of sweeping tariffs by US President Trump has led to a downturn in both traditional and crypto markets. Many assets have yet to recover to their pre-announcement levels, despite some tariff exemptions and a 90-day pause for most countries. Ethereum (ETH) has experienced a decline of over 12.5% in the past 14 days and has traded flat over the past 24 hours, hovering just under $1,600.

Quinlivan noted that there is increased sensitivity toward Ethereum discussions and news related to tariffs and the economy, as prices have approached long-time support levels. He suggested that as the retail community distances itself from Ethereum, the likelihood of an eventual surprise rebound with little resistance increases, especially given the ongoing development and innovation within the Ethereum ecosystem.

The upcoming Pectra upgrade for the Ethereum network, scheduled for May 7, aims to address some of the current challenges. Phase one of the upgrade is expected to double the layer-2 blob capacity from three to six, reduce transaction fees and network congestion, and allow fees to be paid in stablecoins like 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 enabling nodes to verify transaction data without storing the entire data set. 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.