The Ethereum network's average transaction fee fell to an annual low of $1.15, coinciding with a decline in on-chain activity. Falling network activity and transaction fees have caused ETH's supply to deflate.
So what does this drop mean for the ETH price?
Blockchain analytics firm Santiment announced that transaction fees on the Ethereum network fell to $1.15 per transaction, the lowest level since last December. Notably, it was emphasized that this drop occurred when the supply of ETH returned to an inflationary phase.
Ethereum average transaction fees are falling
The drop in Ethereum's transaction fees has been attributed to a recent decline in network activity. To provide context, on September 21st, Binance raised the network's average transaction fee to over $10 while performing routine asset consolidation across various wallets.
It was noted that if these transactions had taken place earlier in the year, at the height of the meme coin craze or NFT trading volumes, the impact on network fees may have been less pronounced.
Binance's actions also had a significant impact on gas fees, as there was no other significant network activity that coincided with the event. This underscored that Ethereum's network activity has cooled down in response to current market conditions.
Market observers interpreted this drop in network activity as a potential positive move for Ethereum. Santiment noted that declining Ethereum fees are often in line with increased network utilization. It was also stated that this could potentially increase the price of ETH and contribute to the recovery of market capitalization:
"Ethereum network fees fell to a 2023 low of just $1.15 per transaction. Historically, we see usage starting to increase as ETH becomes more convenient to circulate. Increased utility can then lead to recovering market capitalization levels."
Ethereum transaction fees are falling!
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