The gas fee on Ethereum (ETH), the second-largest cryptocurrency by market capitalization, is at a 6-month low of just $1.12, the lowest average in a single day since October 18, 2023.
Santiment, a leading market intelligence platform, speculates based on precedence that with Ethereum’s average transaction fee hovering near the $1 mark, this development could trigger a resurgence in price.
Relationship Between Ethereum Gas Fees and Market Sentiment
Per the Santiment data, a little over 8 weeks ago on March 4, Ethereum fees stood at $15.21 per transaction. However, there has been a steady dip ever since with very few rebounds. The $1.12 fee is ultra-low for digital assets and has sparked speculation of its possible implication for Ethereum.
Historically, transaction fees in the Ethereum network acted as a market sentiment barometer helping traders speculate on possible bullish runs. During bullish cycles, when prices soar, gas fees tend to rise due to increased network congestion and demand.
🤑 #Ethereum's average fee level has dipped to just $1.12 per network transaction, the lowest average cost in a day since October 18th.
Traders historically move between sentimental cycles of feeling that #crypto is going "To the Moon" or feeling that "It Is Dead", which can… pic.twitter.com/8b8rLMLyIf
— Santiment (@santimentfeed) April 28, 2024
Conversely, gas fees naturally return to lower levels when market sentiments turn bearish as network activity decreases. Thus the recent low in Ethereum gas fees suggests a possible shift in market dynamics in the coming days.
Implications for Ethereum Price Resurgence
Given this drop in fees, analysts project that with reduced demand for transactions and a decreased strain on the network, a shift could be experienced to spark a price turnaround. This will happen as traders and investors re-enter the market, attracted by lower fees and the potential for growth.
Additionally, the lower gas fees could serve as an incentive for more activity on the Ethereum network, benefiting not only Ethereum but also associated altcoins. Users are usually encouraged to engage in decentralized finance (DeFi) activities, non-fungible token (NFT) trading and other use cases that drive the Ethereum ecosystem, with low transaction fees.
Ethereum is currently trading at $3,286 according to CoinMarketCap and investors are closely monitoring for signs of price resurgence in the coming weeks. Market watchers also believe the decision of the U.S SEC next month on Spot Ethereum ETF may weigh in on the coin’s price trajectory.
