Gas fees on the Ethereum network have reached their lowest levels in six months, with an average fee of $1.12 per transaction, signaling a potential upcoming altcoin rally. The decline in gas fees often correlates with market bottoms, as seen in the past when fees peaked during market tops. This drop in fees could indicate increased activity on the Ethereum network, leading to a possible altcoin rally in the near future. Analysts suggest that the reduced demand and strain on the network may result in a quicker turnaround for Ethereum and associated altcoins than previously expected. Data from CoinGecko shows that Ether has experienced a 4.3% gain in the past week, supporting the idea of a slight rally in its price. Additionally, three Ethereum layer-2 networks – Optimism, Arbitrum, and Polygon – were among the top five best-performing assets in the top 50 cryptocurrencies by market cap, with gains of 11.7%, 3.5%, and 2.8% respectively.
The decrease in network activity has led to an increase in the circulating supply of Ethereum, with 74,458 new ETH issued over the past month while only 57,516 were burned, resulting in a net supply increase of 16,979 ETH. This stands in contrast to the previous five months, which saw a steady deflation of supply. Since Ethereum’s transition to a proof-of-stake consensus mechanism known as ‘The Merge’ in September 2022, more than 437,000 ETH has been burned, highlighting the changing dynamics of the network. The reduced network activity has also led to a boost in Ethereum’s fee revenue, which reached $365 million in the first quarter of 2024, marking a significant year-on-year growth of 155%. This income represents a 200% increase compared to the previous quarter and is attributed to the surge in decentralized finance (DeFi) activity during the quarter.
The surge in DeFi applications has driven heightened network participation, leading to an increase in Ethereum’s fee revenue generated through user transactions. This revenue reached $1.17 billion in Q1, showing a remarkable 155% increase from the same period in 2023 and an 80% increase from the previous quarter. The amplified network activity has pushed Ethereum’s average daily transactions in 2024 to levels close to those witnessed during the network’s peak in 2021. The current average of 1.15 million daily transactions indicates a resurgence in user activity on the network, potentially setting the stage for further growth in the coming months. Despite the challenges faced by the network, Ethereum’s revenue and transaction levels are showing positive signs of recovery and growth.
Overall, the recent drop in gas fees on the Ethereum network, along with the increase in Ether’s price and the growth in Ethereum’s fee revenue in the first quarter of 2024, point towards a potential turnaround for the network and associated altcoins. The decrease in fees could signal increased network activity and participation, leading to a renewed interest in Ethereum and its ecosystem. As the market dynamics continue to evolve, analysts are optimistic about the potential for an altcoin rally in the near future. The changing landscape of the Ethereum network, with the transition to a proof-of-stake consensus mechanism and the surge in DeFi applications, is likely to drive further growth and development in the cryptocurrency space.
