Ethereum fees fell to their lowest level in six months. Why do analysts see this as a positive for cryptocurrencies?

This weekend, the Ethereum rate experienced a local growth phase, which peaked at $3,357. Despite what is happening, commissions on the altcoin network have dropped to their lowest level in the last six months.. Moreover, according to some analysts, the dynamics of the Bitcoin price and the situation with transactions in ETH can be considered harbingers of a new altcoin season, that is, a period of sharp growth in most cryptocurrencies. Let's talk about the situation in more detail.

The Ethereum network is still capable of handling approximately 13-15 transactions per second. Therefore, as users become more active and want to receive quick confirmation of transactions and not get stuck in the mempool, the average commission can increase to unprecedented heights.

However, this has not been happening lately, which essentially hints at a decrease in investor interest in what is happening in the Eth network along with a shift in attention towards L2 networks based on Ethereum like Base.

Base second level network site

Today, the gas cost for quickly confirming a transaction is estimated at 16 Gwei, which is why quickly sending ETH will cost the equivalent of 59 cents.

Gas prices on the Ethereum network today

And although this is a huge amount compared to commissions in the same Solana, such a situation is not typical for Ethereum.

New season of altcoins

Santiment platform analysts shared on Twitter a graph of the average commission on the Ethereum network. Over the past six months, it has decreased to the level of $1.12, while the local maximum was the level of $15.21 on March 4. Here is the corresponding chart.

Ethereum price and commissions on the altcoin network

It is important to note that we are talking specifically about the average commission rate on different days. The latter differ significantly depending on the amount of network resources used to carry out a particular operation. For example, sending ETH will cost less than transferring ERC20 tokens like USDT, and exchanging tokens on decentralized exchanges costs less than NFT transactions. However, this indicator allows you to notice trends on the network in any case.

At the same time, other platforms show a different maximum indicator. On the BitInfoCharts platform, it became the level of $30.3 on March 5, 2024.

Chart of the average commission on the Ethereum network according to the BitInfoCharts platform

Experts explain the correlation between market dynamics and commissions. Here is their response on this matter.

Trader sentiment fluctuates between “native” and “complete death of crypto,” which can be seen in transaction fees. They tend to peak—and sometimes diverge—during local highs and return to normal at lows.

Sentiment in the cryptocurrency industry is really not the best right now, as Bitcoin and the coin market as a whole have been going through a drawdown over the past weeks.. For example, the rate of BTC and Ethereum fell by 11.5 and 11.6 percent, respectively, over the month, while Solana completely lost almost a third of its value.

However, Bitcoin is still above 60 thousand dollars, while the vast majority of popular coins today cost significantly more than a year ago. Why then are traders so unhappy with what is happening? According to experts, this is explained by their expectations of serious profits, which would allow them to realize their financial goals set in advance.. And since they are now much closer than they were a year ago, investors’ patience is becoming less and less.

According to Cointelegraph sources, Ethereum gas fees rose in February to the highest level in the previous eight months amid excitement around the new ERC-404 token standard, which allows for decentralized ownership of pieces of a unique token (NFT).. Against the backdrop of high activity on the network, the price of ETH has also increased significantly since then.

Ethereum price growth from early February to maximum

However, the ETH-BTC trading pair saw a gradual decline the day before. Accordingly, in these weeks Bitcoin turned out to be a more profitable investment, since it both grew more actively and fell less.

Daily chart of the ETH/BTC exchange rate on the Binance crypto exchange

Now the most popular altcoin is most likely approaching its local bottom. Here is a response from experts on this matter.

With the market mostly down over the past six weeks, the lack of demand and network stress could help reverse the trend for ETH and related altcoins sooner than many expect.

Accordingly, analysts suggest that low commissions on the Ethereum network will be able to attract the attention of traders, whose activity will contribute to the growth of an asset based on this blockchain. However, this scheme seems unreliable, since in this case ETH should have increased in price with each decrease in investor activity. However, this definitely doesn’t happen on a regular basis, so experts may be wrong here too.

As of today, second-layer network tokens Optimism (OP), Arbitrum (ARB) and Polygon (MATIC) continue to be in the list of the top 50 coins by largest market capitalization. At the same time, over the weekend they took three out of five places in the top in terms of price growth rates among the specified sample of assets.

Cryptocurrency profitability

The decline in network activity has caused the circulating supply of ETH to rise to its highest level in the past month.. Over the past 30 days, 74,458 new ETH have been issued and only 57,516 coins have been burned, resulting in a net increase in supply of 16,979 ETH.

Alas, commissions on the Ethereum network cannot provide a proper basis for forecasting the rates of ETH and altcoins in general. What is much more important here is the dynamics of the Bitcoin exchange rate, which has lost $63,000 since the beginning of the week.

According to traders, if BTC falls below 60 thousand, this could lead to a cascade of liquidations of traders’ positions on perpetual futures and an acceleration of the depreciation. In addition, in such conditions, the continuation of the bullrun may happen much later.

This phenomenon is also called “capitulation”, and it usually precedes a trend change for a longer period.. By the way, at this scale, the BTC chart now strongly resembles the chart of the Nasdaq stock index – this opinion was shared on Twitter by trader Alan Tardigrade. Here is a corresponding comparison in which this trend is noticeable.

Comparison of Bitcoin and Nasdaq charts

A little more than a week has passed since the BTC halving, against the background of which the market is still at the stage of uncertainty. In general, the local bottom for Bitcoin for this bullrun may not yet have formed, so you should approach opening long positions with caution. At least this point of view is shared by many market participants.

As a result, the experts’ position seems like an attempt to pass off wishful thinking as reality.. Still, low fees on the Ethereum main network indicate a gradual transition of users to more accessible L2 networks, and this does not guarantee the onset of the so-called altcoin season. Moreover, the day before, in the same second-level chains — especially in the case of Base from the Coinbase crypto exchange — there was a sharp increase in various meme tokens. Therefore, in essence, traders already had the opportunity to take advantage of the onset of the bull run, the continuation of which analysts are hinting at.