Ethereum Gas Fees Drop To Record Low As Market Downturn Continues

Ethereum’s gas fees have plummeted, hitting a 20-month low as the market downturn saw a sharp decline in user activity. The market slump has resulted in a significant reduction in network congestion, although the demand for block space remains high. The average transaction fee on Ethereum is just over $2.
Gas Fee In Freefall
Ethereum saw gas fees drop to as low as 69 cents on Saturday. This has been the lowest gas fee in 19 months as the market downturn has a visible effect on costs. The prices pushed back up the following day, rising to $1.57 or 0.0015 ETH. This price level was last seen in December 2020. The decline can be attributed to a fall in the price of ETH and a drop in network activity.
Data from Etherscan shows that the average fee to make a transaction on Ethereum is currently 21 Gwei, which is equal to 0.0021 ETH. ETH is currently trading at around $1100, which comes up to around $2.31.
High Gas Fees In 2021
Gas fees on Ethereum had skyrocketed to record highs in 2021, with the price of ETH surging during the crypto market rally. This was compounded by a surge in interest around NFTs, which saw a majority of NFTs and NFT collections traded on the Ethereum blockchain. At the height of its popularity, minting a single NFT set users back by hundreds of dollars, with more complex transactions costing even higher as the network struggled to deal with increased congestion.
This led to several competing blockchains gaining prominence, including the likes of Avalanche, Solana, and the ill-fated Terra blockchain. These blockchains offered significantly lower fees to users, which led to a massive influx of users.
A Steady Decline
However, since the market’s peak, there has been a steady decline in gas fees. Since the market peak in 2021, ETH has lost around 77% of its dollar value. This has led to the dollar cost per transaction also falling significantly. The last time gas fees on Ethereum made their way below the $2.50 mark was in November 2020. At this time, ETH was trading around $500.
Etherscan data shows that there has been a decline in the average number of daily transactions as well. The rising adoption of Layer-2 solutions such as Optimism and Arbitrum have also helped in easing congestion on the Ethereum network. Both Layer-2 solutions have a collective total value locked (TVL) of around $2.7 billion. However, the network has consistently managed to process 1 million transactions over the past two years. This suggests that demand for block space remains significantly high, regardless of prevailing marketing conditions.