According to Etherscan, Ethereum’s average gas price has dropped to under $1. Less than one month ago, as ETH’s price rose to an all-time high, gas prices were over $50.
This temporarily lowers concern that high gas prices are causing users to leave crypto. Others are using the opportunity to send ERC20 at lower prices or interact with dApps like buying ENS addresses.
General market interest could be affecting gas prices
The recent crypto price drops could be leading to a lower gas price when denominated in USD. However, this does not account for the drop in gas prices denominated in gwei. Furthermore, gas prices were around $50 last month despite the crash in prices. The price drops could explain less interest in crypto, though.
Transaction volume has dropped from around 1.75M in mid-May to just above 1.1M in early June. The decrease of almost 40% would likely mean less demand for transactions in each block thus reducing gas prices. The cost of ERC20 transfers is also lower and is currently at around $2.50. However, lower gas prices might lead to an increase in market interest making the lower gas prices short-lived.
3/ Gas prices have tanked to pre-DeFi summer levels, which signals lower demand for Ethereum blockspace.
Low gas prices are potential indicator of lower incoming volatility.
While not perfect, ETH volatility and gas prices tend to trend in the same direction for the most part. pic.twitter.com/LRzfzVG63f
— Delphi Digital (@Delphi_Digital) June 1, 2021
Focused efforts at scaling may be helping lower gas prices
Additionally, the Ethereum gas limit, which controls how many transactions can be included in a block, was increased from around 12.5M to 15M in April. This change could lead to lower gas prices as more transactions per block reduces a backlog of transactions. Layer2 scaling protocols could also be helping the gas price decrease.
Projects like Polygon aim to reduce throughput issues by deploying Ethereum-compatible blockchains that still connect to Ethereum. This would help move more transactions to these other blockchains that are a part of the Polygon network and thus reduce gas prices with lower demand for Ethereum-based transactions.
#Ethereum daily transaction count at same levels as mid-April while gas prices are *down* ~80%. L1 transactions are getting cheaper.
A result of Flashbots/Archer + Polygon? pic.twitter.com/3diIa6Adqy
— 0xNick
(@0xEther) June 2, 2021
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