Ethereum (ETH) is currently experiencing a notable decline in network transaction fees, reaching their lowest point in the past six months. This development, coupled with a slight increase in the price of ETH over the weekend, has led analysts to speculate on the possibility of a rise in altcoins. Santiment, a crypto analysis platform, revealed in their latest post that the average fee for an Ethereum transaction dropped to $1.12 on April 27, marking a significant decrease.
According to Santiment’s analysis, changes in Ethereum network transaction fees often reflect shifts in market sentiment. Peaks in fees are associated with local market highs, while subsequent declines may indicate market lows. Therefore, the recent drop in transaction fees could be a sign of an upcoming revival in Ethereum’s network activity and potentially the beginning of an altcoin rally.
In February, transaction fees reached their highest level in eight months due to increased interest in the experimental token standard, ERC-404. However, the current drop in fees suggests a significant change in demand dynamics and could potentially lead to an earlier-than-expected resurgence in ETH and related altcoins.
CoinGecko’s data shows that this development coincided with a modest 4.3% increase in ETH’s price over the past week. Furthermore, leading Ethereum Layer 2 solutions such as Optimism, Arbitrum, and Polygon were among the top five best-performing altcoins in the top 50 cryptocurrencies by market value on April 27, demonstrating noteworthy performance.
On the other hand, despite reduced network activity last month, there was a significant increase in Ethereum’s circulating supply. Ultrasound.money data reveals that 74,458 new ETH were issued, while only 57,516 units were burned, resulting in a net increase of 16,979 ETH in the supply over the last 30 days. This contradicts the steady deflation trend observed over the past five months.
Despite the recent increase in ETH-based inflation, the Ethereum network has experienced significant coin burning activity since the transition to the Proof of Stake (PoS) consensus mechanism known as The Merge in September 2022. Over 437,000 ETH have been burned since this transition, effectively removing them from circulation and representing a strong effort to manage and stabilize the network’s supply dynamics.
Disclaimer: The information provided in this article should not be considered as investment advice. Investors should be aware of the high volatility and risks associated with cryptocurrencies and should conduct their own research.
