On June 30, the Ethereum network recorded its lowest fees since 2016. According to data provided by Etherscan, the average gas fee is currently just 3 Gwei ($0.14).
Source: Dune
Gas fees refer to the costs of various operations taking place on the Ethereum blockchain. By paying gas fees, users help ensure the security of the network. In addition to being used to incentivize validators, gas fees also serve to prevent various spam attacks.
During the 2021 bull run, Ethereum gas fees reached sky-high levels as demand in the NFT sector skyrocketed. This has led some experts to say the network is unsustainable and have created more affordable alternatives like Solana.
This time, Ethereum gas fees are reaching extremely low levels even though the network is still experiencing strong trading activities. In fact, the volume of the leading altcoin remains at the same level as at the beginning of the year.
The sharp drop in this fee can be explained by the greater efficiency of the Layer 1 market due to the combination of Layer 2 volumes and the introduction of “blob trading” with EIP-4844 which significantly increased Ethereum scalability.
Pistachio Fi founder Brian Smocovich said in a post on X:
“We will still see gas fee spikes above 15 Gwei at times of higher operational efficiency. Overall, the gas market has been more efficient after 4844. So we should have more affordable days.”
ethereum volume per day is the same if not higher than 6 months ago. L1 fee market is now more efficient because of L2 volume and EIP4844. https://t.co/faW4hlIln4 pic.twitter.com/mjU8uyXFIk
— bsmokes.eth (@BSmokes_) June 24, 2024
Inflation returns
The sharp drop in fees means that Ethereum is no longer a deflationary network because the amount of gas fees is very small. This is annoying to those who are pushing the story of “extremely good money” before the Dencun upgrade takes place.
Over the past seven days, 14,393 ETH were added to the network, according to data provided by ultrasound.money. This means annual supply growth is around 0.62%. The total supply of Ethereum currently stands at 120,185,061 ETH, suggesting it is on track to reach a new peak in 2024.
Ethereum addresses with balances exceeding $1 million have shown significant volatility over the past six months. The number of such addresses increased sharply from mid-January to mid-March, peaking at over 19,500, coinciding with a spike in Ethereum prices. However, by early April, both the number of addresses and the price of ETH had fallen sharply.
Number of addresses with balance >1 million USD in the first 6 months of 2024. Source: Glassnode
After a brief recovery in late April, the number of high-value Ethereum addresses dropped again, reaching a low point around mid-May. This trend reversed sharply later, coinciding with another Ethereum price surge. This pattern highlights a potential correlation between the number of high-value holders and market price movements, suggesting that large investors may be reacting to or driving price changes.
The historical chart further illustrates that while the number of million dollar addresses has increased significantly since 2017, it remains sensitive to market conditions. The significant fluctuations observed in 2024 are consistent with broader market trends, reflecting investor sentiment and market volatility. However, the fluctuations were less extreme in 2024, as was the case in previous bull runs.
Number of addresses with balance > 1 million USD over the years. Source: Glassnode
Itadori
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