The decrease in Ethereum’s gas fee is likely to promote robust network utility and could provide the necessary fuel for the ETH price.
Ethereum (ETH), the world’s second-largest cryptocurrency, concluded May 2023 on a relatively flat note and is currently trading around $1,850. Nonetheless, the transaction gas fee has decreased significantly over the past month, resulting in significant adjustments.
According to on-chain data provider Santiment, Ethereum’s (ETH) gas fee decreased by nearly 70 percent in less than a month. Interestingly, the Ethereum gas fee reached its 2023 high of $14 at the start of May last month. However, by the end of the month, it had fallen to less than $5. Santiment indicates in its report:
Ethereum’s average fees have come back down to earth after its 2023-high $14 per $ETH transaction in early May. More affordability encourages more utility. Additionally, #crypto‘s #2 asset is at an #alltimelow 9.9% on exchanges as #selfcustody reigns.
Gas Consumption by Ethereum Transaction Type
Since the Ethereum blockchain has hosted numerous asset classes for a very long time, each has contributed to gas price increases at various times.
Glassnode, an on-chain platform for crypto-analysts, explains how various asset classes were the primary drivers of Ethereum gas prices at different times. In 2017 and 2018, ICOs contributed 40 percent of Ethereum’s gas and were responsible for most ERC-20 token transactions.
Nonetheless, as demand for ERC-20 tokens began to decline in later years, decentralized finance (DeFi) gained prominence in 2020. The DeFi wave peaked between June 2020 and June 2021, contributing a 30% petroleum tax. Glassnode emphasizes the consistent underperformance of DeFi tokens over the past two years, stating, “Investments in DeFi have been complicated, with token prices recording a remarkable decline over the past few years.”
Since the middle of 2021, non-fungible tokens (NFTs) have risen to prominence, while demand has waned by 2022’s end. Since 2020, the need for stablecoins pegged to the US dollar has increased. glassnode-explains-“The decrease in gas usage from stablecoin transactions reflects a change in their utility rather than a decline in demand.” Stablecoins are used less as a payment method and more as a hedge and reserve of value.
