Recent analysis from Santiment reveals that transaction costs on the Ethereum network have dropped to the lowest levels in five years, correlating with decreased user activity.
Decline in Ethereum Network Fees
According to analytics platform Santiment, transaction fees on the Ethereum network are now around $0.168 per transaction. This reduction in fees is linked to a decrease in the number of users sending Ether (ETH) and interacting with smart contracts. Santiment's marketing director, Brian Quinlivan, stated, 'When many people are using Ethereum, users bid higher fees to get their transactions confirmed faster. This drives the average costs up.' In times of fewer transactions, users do not need to bid as high, resulting in the drop in average fees.
Economic Situation and Impact on Traders
Quinlivan also noted that low fees could preclude a price rebound. Traders seem to be waiting for global economic uncertainty to pass before scaling up their usual transactions with Ether and altcoins. Following the announcement of sweeping tariffs by US President Donald Trump on April 2, traditional and crypto markets saw significant declines. Many assets have not recovered to the same levels despite tariff exemptions and a pause on most tariffs.
Upcoming Pectra Upgrade
The Pectra upgrade for the Ethereum network is scheduled to go live on the mainnet on May 7, following delays. The first phase is expected to double the layer-2 blob capacity from three to six and reduce transaction fees and network congestion, allowing fees to be paid in stablecoins like USDC and DAI. The maximum staking limit is being increased from 32 ETH to 2,048 ETH. The second phase of Pectra is anticipated to roll out in late 2025 or early 2026.
The decline in Ethereum's transaction fees may reflect changes in user activity and market sentiment. The upcoming Pectra upgrade could also influence network dynamics and trading behaviors.
