Ethereum Transaction Fees Hit Two-Month Low After Memecoin Frenzy

Following the memecoin frenzy that made Ethereum transactions "expensive" in May, gas fees have now stabilized and become more "cost-effective" for users.

Ethereum Transaction Fees Hit Two-Month Low After Memecoin Frenzy

Ethereum Transaction Costs Stabilize

Ethereum’s daily transaction fees—flexible charges incurred during transactions or smart contract executions—have dropped to their lowest in two months, following an ATH during the memecoin craze in May 2023.

Early June 2023 data from The Block shows Ethereum transaction fees have decreased by approximately 85%, falling to $7.34 from the ATH of $22.49 reached in early May.

The last time fees were this low was on April 18, when the fee was $7.49 per transaction on the Ethereum network.

7-Day Average ETH Fee (USD). Source: TheBlock

The story remains the same when measured in gwei. Data from Dune Analytics user @hildobby reveals that the average daily gas fee has dropped to 22 gwei from over 140 gwei last month. The last time gas fees were at this level was on April 8.

Ethereum Gas Fee Trends (gwei) Over the Past Year. Source: @hildobby on Dune Analytics

Lower transaction costs not only attract new users but also encourage current participants to fully leverage Ethereum’s capabilities.

As fees normalize, it opens the door to more extensive use cases, making Ethereum a significant platform for various applications, including DeFi, NFTs, GameFi, and more.

Increased Demand on Ethereum DEXs

The spike in gas prices in May was driven by a surge (and resurgence) in memecoin trading, pushing the DEX/CEX ratio—the comparison of trading volumes on decentralized versus centralized exchanges—to a record high of over 20%. This ratio has since dropped below 15% in early June.

DEX vs. CEX Trading Volume Index. Source: TheBlock

Since centralized exchanges typically require more time for approval and listing memecoins, traders flocked to decentralized exchanges like Uniswap to trade memecoins such as PEPE and other tokens.

The demand for memecoin trading on DEXs was a primary driver of Ethereum transaction fee fluctuations.

As reported by Coin68, the memecoin craze has recently made a comeback, with Pepe the Frog (PEPE) seeing a 21,000% increase and entering the top 100 cryptocurrencies by market cap within days of its launch.

This frenzy boosted the memecoin market cap to over $500 million in early May, driving up gas fees on Ethereum and Bitcoin. However, with low liquidity, many of these trending coins have experienced significant price declines.

At the time of writing, ETH is trading at $1,872, down nearly 3% in the past 24 hours and showing no significant growth over the past week.

1-Hour ETH/USDT Chart on Binance at 04:20 PM on 05/06/2023

Ethereum Holdings by Whales Reach New ATH

Ethereum’s price struggles amid a $150 billion drop in cryptocurrency market cap. The top 10 Ethereum whale addresses have reached a new ATH in holdings.

According to Santiment, the top 10 Ethereum whales hold approximately $59.47 billion, equivalent to 31 million ETH. Notably, none of these addresses belong to major exchanges.

ETH continues to attract attention from traders this year, especially following the Shanghai upgrade on April 13, 2023, which sparked increased interest in ETH.

Before the upgrade, many investors feared that allowing unstaking might trigger a massive sell-off negatively impacting ETH’s price. However, as of now, the trend is reversed, with Lido reaching 6 million ETH in staking deposits. This reflects growing confidence in the asset.

The crypto community, particularly fans of the second-largest cryptocurrency by market cap, is optimistic that the upcoming Dencun upgrade featuring EIP-4844 (Proto-Danksharding) in 2023 will be a major driver for ETH’s next growth phase.