Bittime - Analyst from Santiment, an on-chain and off-chain indicator intelligence platform, sees the drop in Ethereum gas fees to the lowest level in the last 6 months as a potential positive signal for altcoins. Even though the price of Ethereum is increasing, transaction fees on the Ethereum network have actually fallen drastically.
Trader Emotional Cycles and Gas Fees
Santiment explains that trader sentiment tends to peak at market tops and reach its lowest point at market bottoms. Ethereum gas fees reached their highest level in eight months in February. Conversely, the current low gas fees could signal increased activity on the Ethereum network in the future, as well as the start of an altcoin rally.
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Ethereum Gas Fees Drop Dramatically
Gas fees on the Ethereum network have plummeted to their lowest level in six months, even as the price of the Ether (ETH) token experienced a slight increase over the weekend. According to a Santiment post on April 28, the average fee for Ethereum transactions dropped to $1.12.
Historically, traders move between sentiment cycles between feeling 'crypto will soar or 'crypto will freefall', which can be observed through transaction costs. Santiment explains that gas costs tend to peak around local market peaks and then fall back to 'resting' levels around market lows.
Link to Altcoin Rally
The analytics platform argues that low gas fees could indicate increased Ethereum network activity in the future and signal the start of an altcoin rally.
With the market having mostly corrected in the last 6 weeks, the lack of demand and pressure on the network may help ETH and related altcoins to recover faster than many expected. This is in line with the increase in Ether prices which was recorded at 4.3% in the last week.
As of April 27, Ethereum layer-2 networks such as Optimism (OP), Arbitrum (ARB), and Polygon (MATIC) were among three of the five best-performing assets among the top 50 cryptocurrencies by market capitalization. These three tokens experienced increases of 11.7%, 3.5% and 2.8% respectively.
Also Read: What is Gas Fee on Crypto?
Impact of Decreased Network Activity
Meanwhile, a decrease in activity on the Ethereum network led to an increase in the circulating supply of Ethereum to its highest point in the past month. Data from ultrasound.money shows that in the last 30 days, there were 74,458 new ETH issued while only 57,516 were burned, resulting in a net supply increase of 16,979 new ETH.
This condition is in sharp contrast to the previous five months which showed gradual deflation. Despite the recent increase in ETH-based inflation, more than 437,000 ETH has been burned since the network switched to a proof-of-stake consensus mechanism, dubbed 'The Merge' which occurred on September 15, 2022.
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Interesting Developments to Follow
The decline in Ethereum gas fees to the lowest level in the last 6 months is an interesting signal to follow. Analysts from Santiment see a potential correlation between falling gas fees with increased network activity and the start of an altcoin rally. However, it is important to note that this prediction is only an analysis from one point of view and should not be taken as a guarantee.
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Monitor price chart movements of Bitcoin (BTC) , Ethereum (ETH) , Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Also Read:
Tips for Finding Altcoins that will Rise
5 Promising Altcoins for Q2 2024
Causes of Altcoin Season Lagging in 2024
DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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