As a seasoned crypto investor with over a decade of experience under my belt, I can’t help but feel a mix of anticipation and apprehension when it comes to Ethereum’s recent developments. On one hand, the all-time low gas prices are undeniably appealing for users, especially with the increased adoption of layer-2 networks like Arbitrum, Base, Optimism, and others. However, as an investor, I can’t help but worry about potential issues such as user and liquidity fragmentation that could arise from this shift.
According to a recent CryptoQuant analysis, the Ethereum gas price has reached a new all-time low.
The average daily gas price for Ethereum reached an all-time record low of 2.9 Gwei, and the average daily fee in US dollars dropped to a bottom not seen in years, at approximately $0.85.
Due to recent findings from CoinGecko’s study, it appears that Ethereum’s daily burn rate has significantly dropped. In the year 2024, more Ether was produced (540,958 ETH) than burned (465,657 ETH), leading to an additional 75,301 Ether being added to the network.
Although Ethereum’s gas fees and burn rate have dropped considerably over the past few years, the number of daily transactions has either held steady or increased slightly when compared to the same timeframes from the previous two years.
It appears that the recent decline in activity can be attributed to the Dencun update implemented on Ethereum on March 13th of this year. This upgrade introduced “Blobs,” a novel transaction type, which empowers layer-2 networks like Arbitrum, Base, Optimism, and others to publish data on Ethereum. Notably, this update promises fee reductions of up to 100%. As an analyst, I believe these fee reductions have likely enticed users away from Ethereum, potentially leading to the observed drop in activity.
Is Ethereum facing new challenge?
As a crypto investor, I’ve noticed that lower fees can be advantageous for users. However, from an investment perspective, it might not hold the same benefits, particularly when we consider a substantial chunk of Ethereum’s activity being shifted to its layer-2 networks. This transition could potentially lead to issues like user and liquidity fragmentation, which could pose challenges in the long run.
Even though Exchange-Traded Funds for Ethereum have been introduced, the value of ETH has decreased following the Dencun update. The supply of ETH has increased by approximately 197,000 coins worth around $500 million, while its price has fallen by about 35%.
At the time of writing, ETH was down 2.79% in the last 24 hours to $1,585, and down 5% weekly.
As per the latest CoinShares report, there were minor investments worth $30 million made in digital asset investment products last week. This was due to economic data suggesting that the Federal Reserve might not lower interest rates by 0.5% in September as previously anticipated. Contrastingly, Ethereum saw inflows of just $4.2 million during the same period, despite a surge of activities among ETF providers.
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2024-08-19 19:03