Ethereum
Is this the end of high costs?
In a significant development for Ethereum, average gas fees on the network fell to 6.8 Gwei, marking the lowest level since January 2020, as shown Y Charts.
This decrease in gas fees has made all on-chain operations, including asset swaps, cross-chain bridges, and minting non-fungible tokens (NFTs), significantly more affordable for users.
Dencun Upgrade Reduces Ethereum Fees
The fall in transaction fees impacted several operations on the Ethereum Network. For example, according to data from Etherscanasset swaps can now be executed for just $7.32, bridging at $2.35, and borrowing at $6.21, while NFT minting is priced at around $12.37.
This fee reduction follows the post-Dencun upgrade, which introduced blobs and optimized network usage. This upgrade has sparked curiosity among developers about the potential increase in gas prices in the event of a surge in market activity.
Notably, the Dencun upgrade decoupled Ethereum transaction fees from network activity, keeping fees low even during periods of high usage.
This change benefits users and adjusts the deflationary mechanism set by previous upgrades like EIP-1559 and The Merge.
With this new fee structure, the expected pressure from the ETH burn mechanism has decreased, indicating a shift towards a more inflationary trend in the short term, as lower transaction fees mean fewer transaction fees. ETH is burned.
Impact on Ethereum Market Dynamics and Future Projections
Martin Koppelmann, co-founder of GnosisDAO, Underlines the current fee dynamics on Ethereum, wondering if low base fees and uncharted blob fee price discovery are the new normal or if the network will once again see spikes exceeding 100 Gwei.
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Ethereum base fees are at an all-time high. Blob fees are still not entered into price discovery (with one very brief exception) and are therefore absolutely zero.
Is this the new normal or will we see periods of +100 GWEI again and what demand will they be driven by?—Martin Köppelmann 🦉💳 (@koeppelmann) May 10, 2024
This uncertainty highlights the challenges of forecasting grid demand and its implications for pricing. Meanwhile, Ultrasoundmoney data shows a significant decrease in the ETH burn rate, with only 521.02 ETH burned in the last day, further evidence of the deflationary impact attenuated after Dencun.
The largest market reactions These developments are mixed. The price of ETH has shown some volatility, with an initial rise of around 2% to a high of $3,058, followed by a decline to $2,920, marking a 16% decline over the 30 last days.
As noted by crypto analyst Shin Forex, this price behavior is partly influenced by liquidity dynamics. His ETH/BTC chart analysis suggests liquidity is shifting toward Bitcoin rather than altcoins like Ethereum, leading to a potential decrease in investor interest in Ethereum.
The analyst also observed that the ETH/BTC pair fell below its 0.05 support level, a trend that historically precedes a price crash. He predicts that Ethereum could reach around $2,500 if the ETH/BTC pair falls below 0.04.
Featured image from Unsplash, chart from TradingView