In a significant development for ethereum, the average gas fee on the network fell to 6.8 Gwei, marking the lowest level since January 2020, as shown ethereum%20Average%20Gas%20Price%20is,93.66%25%20from%20one%20year%20ago.” target=”_blank” rel=”noopener nofollow”>Y Charts.
This decrease in gas fees has made all on-chain operations, including asset exchanges, cross-chain bridges, and non-fungible token (nft) minting, considerably more affordable for users.
Dencun upgrade reduces ethereum fees
The drop in transaction fees has affected several operations on the ethereum network. For example, according to data from Etherscanasset swaps can now be executed for just $7.32, bridge for $2.35, and loans for $6.21, while nft minting is priced at approximately $12.37.
This fee reduction follows the post-Dencun upgrade, which introduced blobs and optimized network usage. This update sparked curiosity among developers about the possible increase in gas prices in case market activity increases.
The Dencun upgrade has notably 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 established by previous updates such as EIP-1559 and The Merge.
With this new fee structure, the anticipated pressure on the eth burning mechanism has decreased, indicating a shift towards a more inflationary trend in the short term as lower transaction fees mean less eth being burned.
Impact on ethereum market dynamics and future projections
Martin Koppelmann, co-founder of GnosisDAO, twitter.com/koeppelmann/status/1788804517527527616?ref_src=twsrc%5Etfw” target=”_blank” rel=”noopener nofollow”>highlighted current fee dynamics on ethereum, questioning whether the low base fee and unexplored price discovery of blob fees are the new normal or if the network will experience spikes to over 100 Gwei again.
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ethereum base fee is at all-time lows. The blob rate has not yet entered price discovery (with one very brief exception) and is therefore absolutely at 0.
Is this the new normal or will we see periods of +100 GWEI again and what demand will drive them?
– Martín Köppelmann (@koeppelmann) twitter.com/koeppelmann/status/1788804517527527616?ref_src=twsrc%5Etfw” target=”_blank” rel=”noopener nofollow”>May 10, 2024
This uncertainty highlights the challenges of predicting grid demand and its implications for tariffs. 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 softened deflationary impact post-Dencun.
Broader market reactions to these developments are mixed. eth price has shown volatility, with an initial rise of around 2% to a high of $3,058, followed by a drop to $2,920, marking a 16% decline over the past 30 days.
As noted by crypto analyst Shin Forex, this price behavior is partially influenced by liquidity dynamics. His analysis of the eth/btc chart suggests that liquidity is moving towards bitcoin instead of altcoins like ethereum, leading to a possible decline in investor interest in ethereum.
The analyst also noted that the eth/btc pair has broken below its 0.05 support level, a pattern that historically precedes a price drop. 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
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