Ethereum Gas Fees Plummet to Record Low: Scalability or Reduced Usage?

Ethereum's average gas price has plummeted to a record low of 1 gwei (approximately $0.06) in 2025, marking a significant decline in transaction fees on the Ethereum network. This drop in gas fees could indicate increased scalability or reduced network usage, with the latter appearing more likely as the primary reason for the recent decrease in base fees.

The Ethereum network has seen cheaper transaction costs since the blobs update in early 2024, particularly on layer 2 protocols. However, some market analysts argue that the update also drove most of the layer 1 demand to layer 2. In contrast, periods of low average gas fees have coincided with reduced active users on the network. According to CryptoQuant, Ethereum's average active addresses have dropped from 403K in December to 380K in early February.

In addition to reduced network activity, Ethereum's supply has risen to pre-Merge levels, which could further weigh on the altcoin's market sentiment and dent demand. However, the Coinbase Premium Index spiked positively during the recent ETH dump, indicating that investors jumped on the discount and grabbed more ETH during the deleveraging event on the 3rd of February. The indicator, which tracks U.S. investors' demand, had eased slightly to a neutral level at press time.

If the Coinbase Premium Index remains green, Ethereum could attempt to recover and reverse recent losses. However, a drop further into red territory could temporarily cap any recovery prospects. As of now, Ethereum has been trading below $3K since the 3rd of February. The impact of the U.S. January Jobs report on Ethereum's recovery odds remains to be seen.