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Ethereum (ETH) has just recorded its lowest transaction or gas fee in 6 months. As with Bitcoin (BTC) and other digital assets, Ethereum has witnessed a massive plunge in price and capitalization since it attained its ATH price of $4,362.35 back in May. From this ATH, the cryptocurrency is now trading at $1,828.69, up 3.87% in the past 24 hours at the time of writing.

The ongoing clampdown of all crypto-related activities in China, including mining and trading of digital assets, has also largely affected Ethereum price. All of these negative fundamentals have perhaps helped veer off the engagements of the Ethereum blockchain users, resulting in a decline in the gas fee.

The Gas Fee: Trailing the On-Chain Data History

Ethereum is known as a highly congested blockchain with a hoard of decentralized finance (DeFi) smart contracts and DApps making it their home. As the DeFi ecosystem gained more prominence through platforms like Uniswap, and Aave amongst others built atop the Ethereum network, miner’s activities increased, with more transaction fees the avenue to reward them for validating transactions.  

According to data from Bitinfocharts, the Ethereum gas fee which rose to an ATH of $69.922 on May 12, 2021, is now currently pegged at $2.312. Based on the nature of activity on the Ethereum blockchain, the average gas fee is often fluctuating from high and lows, with the volatility being more pronounced from January 2021.

Source: BitInfoCharts

The average transaction fee at the beginning of the year was $3.364, a figure that rose to $38.2 as of February 23. A notable spike was recorded afterward before the gas fees peaked at the ATH.  Though the fees are at their lowest for the year, the level may be tilted either positively or negatively, depending on transaction dynamics in the network.

Declining Fees is Supposed to be Good for Price, But is it?

There is a great correlation between network activity and the impact on the price of Ether, as well as the accompanying transaction fee. The currently reduced fee is an indication of low adoption or interest in the various applications built atop the blockchain.

The trading volume of Ethereum is also seeing a reduced activity, a figure that dropped 15.46% to $18,395,407,934.91, according to CoinMarketCap.

A resuscitation of trading volume will show investors, traders, and buyers, in general, are actively using the blockchain. A return to the boosted network activity may revert the fees to their new highs, however, prices may also shoot up. In general, the reduced transaction fee is a positive one for users transacting on the network now as they get to pay lower, however, for its connection with price suppression, it may be seen by many as a “not-too-good” influence.

The declining Ethereum gas fee can thus be seen as a trend that does not necessarily depict network health, however, this depends on the angle it is being viewed from.

The post Why Is Ethereum’s Trading Volume Declining Despite Gas Fee At a 6-Month Low? appeared first on Coingape.

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