By George Ward
Ethereum Gas Fees Plummet to Six-Month Low
Gas fees on the Ethereum network have plummeted to their lowest levels in six months, stirring speculation among crypto analysts about the possibility of an impending altcoin rally. On April 27, the average transaction fee on Ethereum dropped to $1.12, marking a significant decline from previous highs, according to data shared by Santiment, a leading crypto analytics platform.
Historically, fluctuations in transaction fees on Ethereum have served as indicators of market sentiment. Peaks in fees often coincide with local market tops, while lows signal potential market bottoms. In February, Ethereum’s gas fees hit their highest point in eight months due to a surge in interest in the experimental ERC-404 token standard.
Altcoin Rally Imminent?
Santiment suggests that the current decrease in gas fees could indicate a shift in sentiment and herald the beginning of an altcoin rally. The platform mentioned that despite recent market retracements, the decreased demand and network pressure could lead to a quicker bullishness for Ethereum and other altcoins than anticipated.
The decline in gas fees comes when ETH has seen a modest rally, gaining 0.7% in the past fourteen days, as reported by CoinGecko. Additionally, tokens associated with Ethereum layer-2 networks, such as Optimism (OP), Arbitrum (ARB), and Polygon (MATIC), are some of the best-performing assets in the top 50 cryptocurrencies by market capitalization lately.
Surge in Ethereum Circulating Supply
Alongside the drop in gas fees, Ethereum also experienced a surge in its circulating supply. Over the past month, 74,458 new ETH tokens were issued, while only 57,516 were burned, resulting in a net increase of 16,979 new Ether.
This increase in supply contrasts with the previous five months, which saw a steady deflationary trend. Nevertheless, over 437,000 ETH tokens have been burned since the Ethereum network transitioned to a proof-of-stake consensus mechanism, known as the Merge, in September 2022. Analysts speculate that the combination of lower gas fees and increased supply could lead to heightened activity on the Ethereum network, benefiting other altcoins as well.
Cryptocurrency Market And Fed’s Interest Rate Decision
As the cryptocurrency market braces for a pivotal week – the release of the US Federal Reserve’s interest rate decision on May 1, BTC and altcoins brace up for mounting pressure. Over the past weekend, BTC’s price experienced a 2.2% correction, slipping below $62,500, while some top altcoins declined by 4-10%.
This downturn underscores the market’s sensitivity to macroeconomic events and investor sentiment. Market analysts’ expectations about the Federal Reserve’s upcoming interest rate decision lean heavily towards maintaining current rates.
However, recent economic indicators from the United States have injected uncertainty. Weaker-than-expected GDP figures hint at a potential economic slowdown. In contrast, elevated Core PCE inflation figures suggest a growing concern about the possibility of stagflation, a combination of slow economic growth and rising inflation.
While this is still speculative, it has already impacted market sentiment. As a result, expectations have changed, and investors now expect only one interest rate cut in 2024, a significant reduction from the initial forecast of seven cuts at the beginning of the year and three predicted in March.
Thus, cryptocurrency investors remain on edge as they await further developments. The outcome of the Federal Reserve’s decision and subsequent economic data releases, including the April unemployment rate on May 3, will likely dictate market trends in the coming weeks.