Although known for having intimidating transaction fees, a recent report from Santiment shows that transacting on the Ethereum network has become particularly cheap. In a tweet on Wednesday, the intelligence platform stated that it observed that Ethereum had reached an eleven-month transaction fee low of $1.1.
According to Santiment, downturns in transaction fees on a network usually precede a price bounce. Although not a perfect signal of an upward price movement, the analytics platform insinuated that it was one investors should keep an eye on.
“Ehereum’s network has been particularly cheap to use, and this week’s average fee level of $1.13 is the lowest since November 2022. Though not a perfect signal by any means, lower ETH costs generally lead to a rise in utility and price rebound,” Santiment tweeted.
If History is Anything to Go With
Santiment added that the last time Ethereum transaction fees became this cheap, the second-largest cryptocurrency bounced pretty well. The Ethereum price reacted well to the declining gas fees in November 2022, moving from $1,081 and closing the month at $1,276.
However, a drop in transaction fees doesn’t always mean well for a network. Such a dip usually comes with a lack of activity in the blockchain and often makes its assets inflationary, decreases purchasing power, and eventually causes a price drop.
Considering the network’s use case, this scenario is somewhat impossible for Ethereum. Its switch from Proof of Work (PoW) to Proof of Stake (PoS) meant building on the network became more enticing for crypto projects. It is also worth mentioning that the Ethereum network has the highest total value locked (TVL) in the digital asset sector.
Bookmakers thought that the recent launch of an Ethereum futures exchange-traded fund (ETF) by a host of asset managers would boost the network’s transaction volume; however, the hype around the commissioning didn’t meet its expectations. An ETF provides exposure to an asset for investors without directly owning it.
Prolonged Bear
The prolonged bear market has also begun to tell on the Ethereum network, as it has seen a decrease in non-fungible tokens (NFT) and memecoin sales. The network’s largest users have always been NFT and DeFi-related clients.
The Ethereum network has seen a flat transaction volume throughout the year as macroeconomics like the US Securities and Exchange Commission’s (SEC) continual crackdown on crypto exchanges and the Federal Reserve’s (FED) interest rate hikes affected the broader crypto market.
