Ethereum Faces New Challenge as Gas Prices Plummet
A recent analysis by CryptoQuant indicates that the Ethereum gas price has hit a new record low. The daily mean gas price for Ethereum dropped to 2.9 Gwei, while the daily mean fees in USD fell to a multi-year low of $0.85. Consequently, Ethereum’s daily average burn rate also decreased significantly. CoinGecko’s latest study reveals that in 2024, there was a net addition of 75,301 ETH to the network, with 540,958 ETH emitted and 465,657 ETH burned.
Despite the decline in Ethereum gas costs and burning rate, daily average transactions have remained stable or slightly increased compared to the same period in previous years. This stability in transactions is noteworthy given the significant drop in gas costs.
The decrease in gas costs can largely be attributed to the Dencun update implemented on Ethereum in March of this year. The update introduced “Blobs,” a new transaction type that allows layer-2 networks like Arbitrum, Base, and Optimism to transmit data on Ethereum with substantial fee reductions of up to 100%.
While low fees may benefit users, they might not necessarily favor investors, especially with a considerable portion of Ethereum’s usage shifting to its layer-2 networks. This transition could potentially lead to issues such as user and liquidity fragmentation, posing new challenges for Ethereum.
Despite the introduction of Ethereum ETFs, the price of ETH has experienced a decline post the Dencun update. The supply of ETH has surged by approximately 197,000 ETH valued at $500 million, while the price has seen a 35% decrease.
At the time of reporting, ETH was down 2.79% in the past 24 hours, trading at $1,585, with a 5% weekly decline. Recent data from CoinShares suggests that digital asset investment products received modest inflows of $30 million in the previous week. This influx comes amidst indications that the Federal Reserve is less likely to reduce interest rates by 50 basis points in September. Despite increased activity among ETF providers, Ethereum only attracted $4.2 million in inflows last week.
