Ethereum Gas Fees Plummet: Bullish Signal or Temporary Relief?

Ethereum gas fees have dropped significantly, with the average cost of a transfer now at just $0.41, far below the $15.21 peak seen in the past two years. This decline in fees suggests a less congested network, which can be a bullish signal for Ethereum's mid-to-long-term price outlook, according to on-chain analytics firm Santiment.

Low gas fees make it easier for new buyers to enter the market, typically occurring during times of price stagnation or negative sentiment. However, high fees often signal soaring demand, which can lead to temporary corrections. In a recent development, the Ethereum network approved a vote to raise its gas limit to more than 30 million, potentially reducing congestion and lowering fees.

Ethereum is currently trading at roughly $2,674 after falling 2% over the past day. Despite the drop, trading volume has increased by 10%, indicating rising investor interest. Ethereum has been consolidating between $2,565 and $2,800 for the last two weeks, but the most recent drop to the lower end of this range suggests that there may be more declines to come.

Over $60 million worth of ETH has moved off of exchanges in the last day, according to Coinglass data, which raises the possibility that investors are accumulating ETH. Exchange outflows are often interpreted as optimistic indicators, as they suggest long-term holding and lessen selling pressure. However, intraday traders are still being cautious, with $121 million in short positions at $2,650 and $90 million in long positions at $2,605, pointing to a greater level of short-term bearish sentiment.

The SEC's ruling on spot Ethereum ETFs with staking integration continues to be the largest possible bullish catalyst for ETH. Some analysts believe the lack of staking yield has limited demand for these ETFs, but approval could drive institutional inflows. As of Feb 18., total cumulative ETH ETF inflows have risen to $3.16 billion, according to data from SoSoValue.

Meanwhile, ETH's decentralized exchange activity has surged. DefiLlam data shows that Ethereum-based protocols handled $2.62 billion in 24-hour trading volume, up from $1.1 billion