The largest altcoin in the market by its market cap, Ethereum, pretty much went under after the long-awaited Merge was concluded. The network has finally migrated to the proof-of-stake protocol but the token, ETH, is doing badly against everyone’s hopes.
Ethereum’s Sudden Dip
In spite of the fact that it is one of the most popular blockchains, the most disturbing drawback of Ethereum has been its associated transaction fees which users find to be on the high side. Take a look at this factor: Ethereum used to charge about $40 as gas fees for a month from January 2021 to May 2022. The gas fee on the 1st of May was $196.638, the highest daily average payment for gas fees.
The above scenario now seems to be a thing of the past since the Merge. Carrying out Ethereum transactions is now much cheaper. On the 22nd of September, according to reports from The Block, transaction fees on Ethereum hit the lowest level on record in two years.
The Ethereum average gas fee on the network has gone down to as low as 0.0011 ETH, approximately $1.5. Although, there might be other reasons responsible for the falling cost apart from the Merge.
There are speculations that the general crypto market price correction might equally be responsible. The crypto market saw a significant downturn within the last two months, and it drove down the prices of crypto assets. As of the time of this report, Ethereum sells in the $1,200 region, therefore, it is down by more than 50% from its all-time high.
Low Gas Fee Dependencies
Another possible reason for the low gas fees might be associated with large liquidations, especially within the NFT space. There were low activities from speculative NFT buyers, and it affected Ethereum activities. That was particularly evident on OpenSea, the busiest NFT marketplace.
OpenSea used to have a large usage of gas, but it dropped heavily since January. It used to consume about 230,000 Ethereum tokens per annum or 16,400 MoM. The MoM consumption has, however, ropped sharply.
The MoM consumption reports stand at 1,100 as of the time of this report.
But some metrics around Ethereum saw some interesting sides, all thanks to layer-2 growth Optimism and Arbitrum. As a matter of fact, the Ethereum network’s active wallets have increased by up to 60%. Scaling solutions on the network, especially those built on Optimism rollup, became increasingly popular.
Although it is true that the cost of transactions on Ethereum has seen a new low, the number of those transactions on Layer-2 has also increased.