Data shows that the last time ethereum transaction fees fell to such deep lows, the cryptocurrency’s price bottomed out.
ethereum Average Transaction Fees Have Dropped to Just $1.13 Now
According to data from the on-chain analysis firm Holy, the cryptocurrency has seen particularly low fees this week. “Average fees” here refers to a metric that measures the average fees (in USD) that users apply to their ethereum transfers.
Generally, the value of this indicator depends on the traffic received by the eth network. Whenever the mempool is congested with transfers, some transactions may get stuck waiting for a long time, as validators only have a limited capacity to process the transfers.
Those who want their transfers done as quickly as possible can charge higher than average fees so that the network gives them priority. As such, periods of high activity can cause average fees to skyrocket as users try to compete with each other to complete their transactions first.
However, this incentive only exists in times of low traffic, so average rates can fall to low values, as senders no longer have reasons to attach significant amounts to their transfers.
Because of this relationship between fees and network activity, the indicator value can provide insight into whether the blockchain is experiencing high usage. Now, here is a chart showing the trend in average ethereum fees over the last year:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Ethereum-Fees-Lowest-Since-November-2022-Bottom-Signal.jpeg" alt="Average ethereum Fees” width=”2800″ height=”1781″/>
It looks like the value of the metric has hit lows in recent days | Source: Santiment on X
As shown in the chart above, average ethereum fees have been declining in recent months and have reached quite low values recently. This suggests that activity on the network has been cooling.
After the indicator’s latest crash, its value reached the $1.13 mark, the lowest level of the metric since November 2022. Interestingly, back then, the coin had recently faced the FTX crash and, Coinciding with this drop in rates, the price had hit rock bottom.
If this previous pattern is anything to go by, then the recent drop in transaction fees could also help the cryptocurrency find its bottom.
As for why low fees can pave the way to a fund, Santiment notes that a more affordable network can generally lead to increasing utility of the digital asset. This new activity that can emerge as investors are encouraged to move can sometimes help the price show a rally.
It remains to be seen if the price of ethereum will bottom out in the coming days or if the coin will have to face a further decline.
eth price
At the time of writing, ethereum is trading at around $1,600, down 1% from last week.
<img decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Ethereum-Fees-Lowest-Since-November-2022-Bottom-Signal" alt="ethereum price chart” width=”1534″ height=”877″/>
eth hasn't moved much in the last few days | Source: ETHUSD on TradingView
Featured image by Kanchanara on Unsplash.com, TradingView.com charts, Santiment.net
