In a significant development for Ethereum, the average gas price on the network has fallen to 6.8 Gwei, marking its lowest level since January 2020, as shown by YCharts.
This gas fee reduction has made all on-chain operations, including asset swaps, cross-chain bridging, and non-fungible token (NFT) minting, significantly more affordable for users.
Dencun upgrade lowers Ethereum fees
The plunge in transaction fees has affected several operations on the Ethereum network. For example, asset swaps can currently be performed for as little as $7.32, bridging for $2.35 and borrowing for $6.21, while NFT mints cost around $12.37, according to Etherscan data.
This rate reduction comes after a Dencun upgrade that introduced BLOBs and optimized network usage. The upgrade sparked curiosity among developers about the potential for gas prices to rise if market activity spikes.
The Dencun upgrade specifically decouples Ethereum transaction fees from network activity, maintaining low fees even during periods of high usage.
This change benefits users and adjusts the deflationary mechanism set by previous upgrades such as EIP-1559 and The Merge.
This new fee structure alleviates the expected pressure from the ETH burn mechanism, indicating a shift towards a more inflationary trend in the short term, as lower transaction fees mean less ETH burn.
Impact on Ethereum market trends and future predictions
Martin Koppelmann, co-founder of GnosisDAO, said: highlighted The question is whether Ethereum's current price trend, the discovery of unexplored prices with low base fees and blob fees, is the new normal, or if the network will experience another spike above 100 Gwei.
Ethereum’s base price is at a record low. BLOB fees aren't even in price discovery yet (with very brief exceptions), so they're completely 0.
Is this the new normal or will there be another +100 GWEI period and what demand will drive it?— Martin Koeppelmann 🦉💳 (@koeppelmann) May 10, 2024
This uncertainty highlights the challenges in predicting network demand and its impact on pricing. Meanwhile, Ultrasound Money data shows a significant drop in ETH burn rate, with only 521.02 ETH burnt in the past day, further indicating that the effects of post-denkun deflation have eased. It is evidence.
Broad market reactions to these developments have been mixed. The price of ETH has shown volatility, rising about 2% early to a high of $3,058 before falling to $2,920, marking a 16% decline over the past 30 days.
As crypto analyst Shin Forex points out, this price movement is partially influenced by liquidity dynamics. His ETH/BTC chart analysis suggests that investor interest in Ethereum may decline as liquidity moves towards Bitcoin rather than altcoins like Ethereum.
Analysts also noted that the ETH/BTC pair broke below the 0.05 support level, a pattern that historically precedes a price crash. He predicts that if the ETH/BTC pair falls below 0.04, Ethereum could rise to around $2,500.
Featured image from Unsplash, chart from TradingView
