Ethereum Transaction Fees Drop 90% Amid Market Uncertainty

Ethereum transaction costs have fallen to their lowest point in five years, with the average fee to process a transaction now standing at approximately $0.168. This steep decline in fees matches a pattern of reduced activity on the network, as fewer users are sending Ether or utilizing smart contracts on the blockchain. According to Brian Quinlivan, marketing director at Santiment, low network fees often appear before price rebounds. However, many traders seem to be waiting for global economic questions to clear up before they return to their normal trading patterns.

Market uncertainty has kept traders on the sidelines, with hesitation continuing after market worries that started in early April. The announcement of sweeping tariffs by the US President led to a downturn in traditional markets, which in turn affected the cryptocurrency market, where most assets languish below pre-announcement values.

Despite the market crisis, Ethereum development continues to progress. The Pectra upgrade is scheduled to go live on May 7, bringing numerous enhancements to the network. The first part of the upgrade will increase layer-2 blob capacity from three to six, reduce transaction fees, alleviate network congestion, and allow users to pay fees with stablecoins like USDC and DAI. Additionally, the upgrade will increase the maximum staking limit from 32 ETH to 2,048 ETH. A second phase planned for late 2025 or early 2026 will add new data structures for better storage efficiency and create a system that helps nodes verify transaction data without storing the entire dataset.

Meanwhile, data from Lookonchain shows that long-term Ethereum holders are now selling their positions, even after holding through previous market cycles. These sales are happening in the $1,500 to $1,700 price range. The selling activity has created mixed signals for market watchers, with some analysts viewing it as a warning sign of a potential sell-off ahead, while others believe it could lead to market stabilization. This selling comes at an interesting time, with network usage at multi-year lows but major technical upgrades on the horizon. Based on Quinlivan’s assessment, reduced retail interest combined with ongoing development could create conditions for “an eventual surprise rebound with little resistance.”

Ethereum price has dipped by more than 11% over the last two weeks, now trading just below $1,600. The price has remained unchanged over the last 24 hours. The reduced activity and lower fees on the Ethereum network present a unique opportunity for users to transact at a lower cost, while the upcoming Pectra upgrade promises to bring significant improvements to the network's functionality and efficiency. However, the market's response to these developments remains uncertain, with traders waiting for clearer economic signals before resuming their normal trading patterns.