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The Ethereum blockchain has recently witnessed a significant drop in transaction fees, reaching its lowest level since 2020, primarily due to diminished user activity.
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This decrease in fees, now around $0.168 per transaction, indicates a broader lull in Ethereum’s network usage, according to insights from on-chain analytics platform Santiment.
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“When fewer people are transacting, users don’t need to bid much,” said Brian Quinlivan from Santiment, explaining the dynamics of supply and demand at play.
Ethereum transaction fees hit a five-year low as user activity declines, suggesting a quiet period for the blockchain. Insights from Santiment highlight key market dynamics.
Ethereum Transaction Fees Dip Amid Decreased Activity
The recent trend of plunging Ethereum transaction fees can be attributed to a notable decline in user engagement on the network. According to Santiment, with fees averaging around $0.168, the Ethereum blockchain is experiencing a significant drop in on-chain activity—a situation that has not occurred since 2020.
This drop is attributed to two main factors: a decrease in the number of users sending Ether (ETH) and a decline in the usage of smart contracts. As demand for transaction processing diminishes, users are less inclined to bid high fees for their transactions to be prioritized. Instead, they benefit from the current oversupply in transaction capacity, thus leading to notably lower costs.
Impact of Global Economic Trends on Ethereum Transactions
The economic landscape has a ripple effect on crypto activities, including Ethereum transactions. Recent geopolitical events, particularly the sweeping tariffs announced by US President Trump on April 2, have led traditional and crypto markets to experience significant declines. Quinlivan noted that many assets have struggled to regain their pre-tariff levels despite temporary exemptions granted to some countries.
“The more the retail community leans away from an asset, especially one with still thriving development, the higher the likelihood of an eventual surprise rebound with little resistance,” Quinlivan remarked, indicating that current economic uncertainties are making traders hesitant to transact frequently.