According to Ryan Lee, chief analyst at Bitget Research, the significant drop in Ethereum gas fees could be a bullish point for the network’s native token, Ethereum (ETH).
Record Drop in Ethereum Gas Fees Signals Potential Bullish Turn for ETH, Says Analyst
Ethereum gas fees, which represent the cost of transactions on the network, have fallen more than 95% from their March highs, potentially paving the way for a price recovery.
“Whenever ETH gas fees hit bottom, it usually signals a price bottom in the medium term. ETH prices tend to recover strongly after this cycle, and when this moment coincides with a rate cut cycle, the market’s asset impact is full of possibilities,” Ryan Lee said.
Gas fees dropped to as low as 0.6 Gwei earlier this week, with some low-priority transactions costing 1 Gwei or less, a rarity in recent years. This is a sharp drop from March, when fees rose to 83.1 Gwei due to a surge in network activity.
Lee attributes the fee drop to the decreasing demand for Ethereum block space and the preference for alternative blockchains.
“Ethereum’s gas fees dropping to their lowest level in five years can be attributed to meme coin season and the migration of decentralized application (DApp) interactions to other faster and cheaper blockchains such as Solana and Layer 2 solutions.”
Additionally, the long-awaited Dencun upgrade in March further reduced gas costs by improving network efficiency.
The Dencun upgrade refers to two major Ethereum updates that optimize transaction processing and verification. Since July, Solana-based application Pump has highlighted this shift in activity by generating more fees than the entire Ethereum network in a 24-hour period on several occasions.
*This is not investment advice.
