Ethereum gas fee falls to a six-month low. Is the alt season coming?

Author: Tom Mitchelhill, CoinTelegraph; Compiler: Deng Tong, Golden Finance

Although Ethereum prices rose slightly over the weekend, Gas fees on the Ethereum network have fallen to a six-month low, which analysts at crypto analytics platform Santiment said could herald the advent of altcoin season.

According to Santiment’s April 28 post, the average fee on the Ethereum network fell to $1.12 on April 27.

“Traders have historically oscillated between sentiment cycles of feeling crypto is about to ‘bump’ or feeling ‘it’s dead,’ which can be observed through transaction fees,” Santiment wrote.

Source: Santiment

Fees tend to peak near local market tops and fall back to “stationary” lows near market bottoms, Santiment explained.

In February, Ethereum gas fees hit an eight-month high amid strong interest in an experimental token standard called ERC-404.

The analytics platform suggests that lower gas fees could signal a future uptick in Ethereum network activity and herald the start of an altcoin rally.

“With the market in a major correction over the past 6 weeks, lack of demand and network pressure could help ETH and related altcoins turn things around faster than many expected.”

Ethereum prices rose slightly, up 4.3% last week, according to CoinGecko.

On April 27, Ethereum Layer 2 networks Optimism (OP), Arbitrum (ARB), and Polygon accounted for three of the top 5 best performing assets among the top 50 cryptocurrencies by market cap, with gains of 11.7%, 3.5%, and 2.8%, respectively.

Source: Luke Martin

Meanwhile, the decline in network activity caused Ethereum's circulating supply to surge to its highest point last month.

According to Ultrasound.money data, in the past 30 days, 74,458 new ETH were issued, while only 57,516 ETH were destroyed, resulting in a net supply increase of 16,979 new ETH.

This is in stark contrast to the previous five months, which continued to deflate. Despite the recent rise in ETH-based inflation, over 437,000 ETH has been destroyed since the network moved to a proof-of-stake consensus mechanism on September 15, 2022 (known as the “merge”).