Ethereum Transaction Fees Drop to the Lowest Level in the Last 5 Years: What Does It Mean? Is it a sign of a rally?

According to the latest report published by cryptocurrency analytics firm Santiment, transaction fees on the Ethereum (ETH)** network have fallen to the lowest level in the last five years. The average transaction fee dropped to just $0.168. This decline is attributed to a decrease in user activity on the Ethereum network.

Santiment stated that one of the main reasons for this dramatic decline is that fewer people are transferring Ethereum and interacting with smart contracts gibi( )DeFi, NFTs. Since the ETH network is a structure that works according to supply-demand dynamics, it was stated that as the density in the network decreases, users can perform transactions with lower fee offers.

Santiment's statement included the following statements:

"When many people use Ethereum, users offer higher fees for faster confirmation of their transactions. This, in turn, increases the average transaction costs. However, during periods of low network usage, such as now, users can make transactions by bidding less. This leads to lower transaction fees."

Santiment also emphasized that low transaction fees are a very favorable period for ETH developers and users in terms of application development and testing. On the other hand, Ethereum's market cap has fallen by 61% in the last four months, causing investors to adopt a cautious attitude. It appears that investors continue to keep ETH and other altcoin transactions to a minimum until the general economic uncertainties pass.

The report noted that periods when transaction fees have historically been this low have generally preceded price recoveries.