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Ethereum Gas Fees Plunge to Lowest Levels Since March 2020

CryptoWhale
CryptoWhale
For months, Ethereum has been plagued with ridicule after its network fees surged rapidly. This was justified, as the network became overly expensive, congested, and unrealistic to use.
In a recent report published by crypto market research firm Coin Metrics, they’ve confirmed that the average price of gas on the Ethereum blockchain is at its lowest point since March 2020.
While the average gas price was regularly between 150 and 200, it has been between 15 and 30 GWEI since the end of May.
While many will assume that the Ethereum Gas decline is a consequence of the price crash, we can see the gas fees started to move in a downtrend many weeks before the crash.
Declining network congestion reason for low Ethereum gas prices.
The classic market principle of supply and demand also applies to the Ethereum Gas price. ETH is currently struggling with little demand, which strongly affects price development. At the end of April, the gas limit was raised from 12.5 million to 15 million GWEI per block.
This allows more transactions to be processed in each block, causing the statistical demand value to drop. But falling demand is not the only reason for the current record low.
The Ethereum Gas pricing mechanics work on pay more, pay the first basis. The more GWEI you are willing to give away, the more incentive you give the miners to process your transaction faster. So-called arbitrage bots voluntarily pay more gas to push their decentralized exchange transactions through as quickly as possible. However, these transactions are now moved to a parallel chain on the Ethereum blockchain. This circumstance is also leading to falling gas prices.
However, Ethereum gas prices are unlikely to remain at such a low level permanently. Experts assume that gas prices will rise again with the “London” update on August 4th.
At a glance: What is Ethereum Gas?
Gas is a “fuel” on the Ethereum blockchain, just like in real life. All transactions, or rather the fees incurred in the process, are paid for with gas. Users are free to decide whether they want to pay more to have their transactions validated faster voluntarily.
A higher gas price offers an incentive to prioritize the transactions for the miners who mine the blocks. However, if you set a meager gas price for your own transaction, it can sometimes happen that a transaction gets stuck because no one will validate it.
The gas is paid in GWEI. GWEI is the smallest unit of Ether. One ETH consists of 1,000,000,000 GWEI. So with the current gas prices, miners are trying to get rid of the transactions that offer a higher gas price if possible.
The gas pricing mechanism is essential to the Ethereum blockchain as it ensures that fees are calculated fairly.
Ethereum continues to slide
It is not only gas prices that are currently at a rather low level. The Ethereum price continues to degrade after the big crash of early May. From an all-time high of over 4,000 to under 1,800 US dollars, the price has fallen in the last month. The recent upward correction failed to establish itself. In the last week, Ether depreciated by over ten percent and is currently hovering at 2,114 US dollars, as data from CoinMarketCap shows.
In any case, the gas price developments are not a good sign for positive forecasts for the ETH course. Technical chart analysts see the $2,400 mark as an indicator for a wide bear wave.
Conclusion: Ethereum is currently giving little gas
Falling demand among investors who want to buy Ethereum makes for attractive gas prices, but at the same time means a not-so-positive development for the Ethereum price.
Currently, it is to wait and watch the indicators. The more support zones Ether leaves behind, the more likely a further downtrend is.
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