Ethereum (ETH) is currently experiencing a notable decline in network transaction fees, reaching their lowest point in the past six months. This development has sparked speculation among analysts about a potential surge in altcoins in the near future. Santiment, a crypto analysis platform, has reported that the average fee for an Ethereum transaction dropped to $1.12 on April 27, a significant decrease as highlighted in their latest post.
According to Santiment’s analysis, changes in Ethereum network transaction fees often reflect shifts in market sentiment. Peaks in fees are usually associated with local market highs, while declines may indicate market lows. Therefore, the recent drop in transaction fees could be a sign of an upcoming revival in Ethereum’s network activity and could potentially mark the beginning of an altcoin rally.
In February, transaction fees reached their highest level in eight months due to increased interest in the experimental token standard, ERC-404. However, the current decrease in fees suggests a significant change in demand dynamics and could potentially lead to an earlier-than-expected resurgence in ETH and related altcoins.
CoinGecko’s data shows that this development coincided with a modest 4.3% increase in ETH’s price over the past week. Additionally, leading Ethereum Layer 2 solutions such as Optimism, Arbitrum, and Polygon were among the top five best-performing altcoins in the top 50 cryptocurrencies by market value on April 27, demonstrating notable performance.
On the other hand, despite a decrease in network activity last month, there was a significant increase in Ethereum’s circulating supply. Ultrasound.money’s data reveals that 74,458 new ETH were issued, with only 57,516 units burned. This resulted in a net increase of 16,979 ETH in the supply over the last 30 days, which contrasts sharply with the steady deflation trend observed over the past five months.
Despite the recent increase in ETH-based inflation, the Ethereum network has experienced significant coin burning activity since the transition to the Proof of Stake (PoS) consensus mechanism, known as The Merge, in September 2022. During this transition, over 437,000 ETH have been burned, effectively removing them from circulation and representing a strong effort to manage and stabilize the network’s supply dynamics.
Disclaimer: This article does not provide investment advice. Investors should be aware that cryptocurrencies are highly volatile and carry inherent risks. It is recommended to conduct thorough research before making any investment decisions.