TL;DR
- Transaction fees for both Bitcoin and Ethereum have plunged to multi-month lows. This is a consequence of reduced activity on the networks, likely due to the recent bearish sentiment in the crypto market. Typically, transaction fees rise during periods of high volatility, especially when prices go up.
- Ethereum has seen a particularly significant drop in fees. This is due in part to a March upgrade that facilitates the use of layer-2 solutions, which are faster and cheaper alternatives to the Ethereum mainnet. Since the update, gas fees have plunged by around 92%.
- Despite the recent crypto market turmoil, these low fees provide some welcome relief to users and developers. This is especially helpful considering the significant losses many have incurred during the market downturn.
Bitcoin and Ethereum fees have hit rock bottom, reaching their lowest levels in months amidst a tumultuous week for the crypto market in 2024. On June 23, the average Bitcoin transaction fee plummeted to a mere $1.93 per transaction, a record low not seen since October 2023.
The decrease in fees on the Bitcoin network is indicative of reduced network activity and less competition. Historically, transaction fees on the Bitcoin network tend to soar during periods of high market volatility, especially when prices appreciate.
The rise in price speculation has led to fierce competition for block space. Yet, the 2021 bull market stood out, with Bitcoin reaching $69,000 and transaction fees staying surprisingly low.
Ether Gas Fees Plummet
Meanwhile, Ether gas fees have also hit a new low, with gas prices dropping to as little as 1 gwei—the lowest level seen in years. Currently, the gas fee on the Ethereum network averages around 4.5 gwei.
Gwei is a unit of Ether employed for transactions within the Ethereum ecosystem. One gwei is equivalent to one billionth of one ETH. The decrease in gas fees on Ethereum is a result of users moving their operations from the base layer to the layer-2 network after the March Dencun upgrade.
Since the upgrade, average gas prices on Ethereum have decreased by approximately 92%. According to a report from Layer2 Insider, layer-2 networks pocketed $950,000 in the last week alone.
Bitcoin and Ethereum Crypto Market Turmoil
These low transaction fees come when the broader crypto market is facing one of its most challenging weeks in 2024. Bitcoin dropped below the critical $63,000 support level, and several altcoins experienced double-digit losses.
While the crypto market has seen significant growth over the past six months, recent weeks have been dominated by bearish sentiment. Leveraged market liquidations have resulted in substantial losses for traders, and spot holders have also felt the impact.
Despite this market turmoil, both Ethereum and Bitcoin are experiencing multi-month lows in transaction fees, providing some relief to users and developers.
Ethereum’s Layer 2 Solutions
Ethereum’s gas fee reduction is particularly noteworthy given the high level of network activity. On June 21, Ethereum Layer 1 and Layer 2 protocols recorded an average of 299 transactions per second. This paradox of low fees and high activity can be attributed to the increased adoption and efficiency of Layer 2 (L2) solutions.
L2 solutions, designed to enhance Ethereum’s scalability, process transactions off the main Ethereum chain, thereby reducing congestion and costs. Their widespread adoption reflects their critical role in easing network traffic and making transactions more affordable for users and developers alike.
The recent decline in transaction fees for Bitcoin and Ethereum provides a welcome respite for users, especially during a turbulent market period. As the crypto landscape continues to evolve, the efficiency gains from layer-2 solutions may play a pivotal role in shaping the future of blockchain networks.
