• Ethereum’s average gas fees dropped by nearly 70% within a month, from a high of $14 to under $5.
• The decline in gas fees reflects increased affordability and encourages greater utility on the Ethereum network.
• Changes in the dominance of different asset classes, such as ICOs, DeFi, NFTs, and stablecoins, have influenced Ethereum’s gas prices over time.

Ethereum (ETH), the world’s second-largest cryptocurrency, concluded May 2023 on a relatively flat note, currently trading around $1,850. However, an important development observed during the past month was a significant drop in transaction gas fees on the Ethereum network.

According to on-chain data provider Santiment, Ethereum’s gas fees plummeted by nearly 70% within the span of a month. Notably, in early May, the gas fee reached its highest point for the year at $14. However, by the end of May, it had dropped to under $5. Santiment’s report highlights this decrease in fees and notes that increased affordability encourages greater utility for the Ethereum network. Additionally, self-custody of cryptocurrencies has gained popularity, with Ethereum’s token (ETH) holdings on exchanges reaching an all-time low of 9.9%.

Glassnode, an on-chain crypto analytics platform, sheds light on the various factors influencing Ethereum gas prices over time. During the peak of ICOs in 2017-2018, they accounted for 40% of the gas on the Ethereum network, primarily due to the high number of ERC-20 token transfers associated with ICO projects.

However, as the demand for ERC-20 tokens declined in subsequent years, decentralized finance (DeFi) emerged as a prominent sector in 2020. The DeFi wave reached its zenith from June 2020 to 2021, contributing 30% of the gas fees. Glassnode highlights that despite DeFi’s popularity, the performance of DeFi tokens has been lackluster in recent years, indicating poor token price performance.

In the mid-2021 period, non-fungible tokens (NFTs) gained significant prominence, although their demand subsided by the end of 2022. Additionally, USD-pegged stablecoins experienced a surge in user demand since 2020. Glassnode explains that the decrease in gas usage from stablecoin transactions reflects a shift in utility, where stablecoins are now less utilized for payment purposes and more commonly used for hedging and as a store of value.

These developments in Ethereum’s gas fees and the changing dynamics of different asset classes on the network hold implications for the price trajectory of Ethereum (ETH). Investors and individuals in South Africa should closely monitor these trends and market shifts to make informed decisions regarding Ethereum and its potential for price surges in the future.