Transaction Fees for Ethereum and Bitcoin Drop During Market Decline
Ethereum and Bitcoin transaction fees have experienced a significant decline recently, with Ethereum gas prices dropping to an average of 7.32 Gwei as of June 21, 2024, down from higher levels earlier in the year. This decrease in fees is due to record-high activity on Layer 2 (L2) solutions on Ethereum, which has helped to alleviate congestion on the main chain.
Similarly, Bitcoin transaction fees have also decreased, reaching $1.93 per transaction on June 23, the lowest level since October 2023. The reduction in fees on both networks is attributed to increased efficiency, particularly due to L2 adoption on Ethereum, rather than a decrease in overall network activity.
These low fees come amidst a market downturn, with Bitcoin falling below $63,000 and many altcoins experiencing double-digit losses. Despite this, both Ethereum and Bitcoin are experiencing a significant drop in transaction fees, reaching multi-month lows despite high network activity.
The reduction in Ethereum gas fees is particularly noteworthy given the high level of network activity. The average gas price on Ethereum stood at just 7.32 Gwei, a dramatic decrease from 98.68 Gwei recorded on March 5, making the network significantly more affordable for both developers and users.
The impact of these efficiency gains is clearly visible in the cost of common transactions. For instance, performing a swap on Uniswap now costs just $1.06, trading an NFT on Seaport costs $1.49, and transferring ETH on-chain costs a mere $0.23. When using L2 networks like Base, which incorporates “blob” transactions, these fees are reduced even further, with a Uniswap swap on Base costing just $0.0016.
However, the dramatic reduction in gas fees has also led to a decrease in Ethereum’s burn rate, which is now at a 12-month low, causing Ethereum’s supply to turn slightly inflationary, with a growth rate of around 0.56% per year according to ultrasound.money.
On June 23, the average Bitcoin transaction fee reached $1.93, its lowest level since October 2023, representing a significant decrease from the fee spikes often seen during periods of high market volatility or price appreciation. The current low fee environment for both Ethereum and Bitcoin comes at a time when the broader cryptocurrency market is experiencing significant turbulence.
Despite the market turmoil, the low transaction fees on both networks represent a silver lining for users and developers, making these blockchain networks more accessible and cost-effective for a wide range of applications, from decentralized finance (DeFi) to non-fungible tokens (NFTs) and beyond.
