Ethereum (ETH) recorded the lowest transaction and transaction fee in 6 months. Like Bitcoin (BTC) and other digital assets, Ethereum hit its highest ever price of $4,362.35 in May. It then witnessed the massive drop in the market. Ethereum is trading at $1,828.69, up 3.87% in 24 hours at the time of writing.
Restrictions on crypto-related activities in China, including mining and trading of digital assets, have also heavily impacted the Ethereum price. All these negative developments, perhaps, resulted in blocking the interactions of Ethereum blockchain users, which resulted in a reduction in the transaction fee.
Ethereum transaction fee
Ethereum is known as a highly congested Blockchain with decentralized finance (DeFi) smart contracts and DApps. As the DeFi system gained more prominence through platforms like Uniswap and Aave, as well as being built on top of the Ethereum network, the activity of miners increased. The way to reward for verifying transactions has increased with more transaction fees.
According to data from Bitinfocharts, the Ethereum transaction fee, which rose to the highest price ever to $69,922 on May 12, 2021, is currently pegged at $2,312. The average transaction fee for its activity on the Ethereum Blockchain generally fluctuates high and low as volatility becomes more pronounced from January 2021.
Figure 1. Ethereum Avg. Transaction Fees.
The average transaction fee at the beginning of the year was $3,364. Gas prices then increased significantly before peaking at the highest price ever reached. While the fees are at their lowest for the year, the level could tilt either positively or negatively depending on the transaction dynamics in the network.
Are falling transaction fees for Ethereum good for the price?
There is a great correlation between network activity and the effect and transaction fee on ETH price. The currently reduced fee is an indication of low acceptance or interest in various applications built on Blockchain.
Ethereum’s trading volume is also down by 15.46% to $18,395,407,934.91.
A return to heightened network activity could push transaction fees back to their new highs, but Etherum price could also rise. Overall, the reduced transaction fee looks positive for users transacting on the network as they pay lower, but it may suppress the price. The falling Ethereum transaction fee, therefore, can be seen as a trend that does not necessarily indicate network health, but it depends on what angle you look at it from.