On-chain data shows that Ethereum’s average transaction fees have dropped by almost 70% since the beginning of May. This is what it can mean for the asset.
Ethereum’s average transaction fees have dropped considerably recently
According to data from the on-chain analysis firm Holy, the average fee on the net was around $14 not too long ago. “Average transaction fees” here naturally refers to the total amount of fees (in USD) that the average user is attaching to their transfers at the moment.
The value of this flag depends on the amount of traffic that the Ethereum network is currently receiving. When traffic on the blockchain is low, users have no need to pay exorbitant amounts of fees, as the network usually has enough capacity to handle transactions quickly anyway.
However, in times of network congestion, competition for transfers can be quite high. As the chain only has a limited capacity to process transfers, transactions with the highest amount of fees are prioritized.
Naturally, senders who want their transfers to go through as quickly as possible charge a higher fee than the competition. Others can also do the same and therefore the average fees on the network can skyrocket.
Now, here’s a graph showing how the average fees on the Ethereum blockchain have changed over the last month or so:
The value of the metric seems to have observed a large degree of decline in recent weeks | Source: Santiment on Twitter
As shown in the chart above, Ethereum’s average fees rose to quite high values in early May. This increase in the metric coincided with a rally in the asset price towards the $2,000 level.
Rallies usually attract a lot of eye to the coin, so it is not unexpected to see the network become congested in such periods. A high fee may even be a positive sign for a rally, as it suggests that the blockchain is currently facing a large amount of transfer activity.
Such high trading activity implies the presence of a large number of active traders in the market, which is what is needed to sustain sharp price action such as a rally.
After the rally peaked, the indicator also began to decline and has since reached a value of just $4.28. This is around 69% less than what was seen during the peak, when the median fee was around $14.
Naturally, the current relatively low fees would imply that there is not much activity on the Ethereum blockchain at the moment. While such low focus on the coin may be a negative for building any sustainable price movement, it is also true that the low fees mean that users are more likely to use the chain for utility purposes, as it would be affordable to do so. .
ETH price
As of this writing, Ethereum is trading around $1,800, up 3% in the past week.
Looks like ETH has been moving sideways recently | Source: ETHUSD on TradingView
Featured Image by Michael Förtsch on Unsplash.com, Charts from TradingView.com, Santiment.net
