Ethereum gas fees have plummeted to a five-year low, marking a significant shift in the network’s financial landscape. As of Aug. 19, research firm Kaiko reported that Ethereum’s gas fees have dropped to just 2.15 Gwei, which is approximately $0.13.
According to Etherscan’s Gas Tracker, this is the lowest average fee seen since 2019. This sharp decline in transaction fees poses a major challenge for Ethereum. Gas fees are a primary source of revenue for network validators, and the drop in fees could impact their financial incentives.
Impact on Ethereum supply
The drop in fees might influence the issuance of Ethereum (ETH). Since April, the total supply of Ether has grown because of lower network fees and a reduced base fee burn rate from EIP-1559. As a result, Ethereum’s supply has increased by about 0.2%, from 120.063M to roughly 120.286M.
This means that the supply has increased by an additional 223,000 ETH, worth around $591 million at current prices, over the past four months. Despite this increase, the ETH supply remains lower than at the Merge in Sept. 2022, indicating that the rapid inflation seen before then has slowed.
The analytics platform reports a 0.71% annual increase in ETH supply weekly, translating to approximately 16,500 ETH added each week at the current burn rates. In comparison, Bitcoin’s supply inflation rate is slightly higher at 0.83% over the same timeframe.
Price outlook
ETH prices have risen over the past 12 hours, reaching $2,662 during the Tuesday morning Asian trading session. However, since the recovery on Aug. 9, prices have remained within a narrow range and have struggled to break above $2,750 amid what could be a volatile week for crypto.
Nevertheless, analysts suggest that the low gas fees might indicate a potential price bottom. Ryan Lee said that historically when ETH gas fees hit rock bottom, it often signaled a mid-term price bottom
