• Ethereum gas fees have hit a five-year low, according to a new Kaiko report.
  • Many are worried about how the steady increase in supply will affect the price of ETH.

While ETH prices are struggling, the gas fee for Ethereum has lately dropped to its lowest point in five years. Kaiko recently highlighted the decline and what it may mean for the price of the cryptocurrency. Despite the launch of Spot Ether ETF trading in the US, the second biggest cryptocurrency by market size has lately had very erratic prices.

Ethereum gas fees have hit a five-year low, according to a new Kaiko report. Layer 2 solution development and the March Dencun upgrade are the main causes of this decline.

Steady Increase in Supply to Affect Price

Significantly lowering transaction costs for Layer 2 networks, innovations like ‘Blobs’ were introduced with the Dencun upgrade. To put that in perspective, networks like Arbitrum and Base may now publish their data on Ethereum for a far lower price than before.

There is a hitch to the cheaper gas fees, even if they may seem like good news for ETH users. Because less Ethereum is being spent on transaction fees, the total supply of the cryptocurrency rises. Many are worried about how the steady increase in supply will affect the price of the cryptocurrency since April.

The cryptocurrency’s gas fees have historically fluctuated wildly, most notably during the 2021–22 surge in interest in DeFi. As a whole, network costs have been falling due to technical developments, and the present drop in gas fees is only one example of this trend.

Nevertheless, the recent surge in supply in response to demand from initiatives like the Spot Ether ETF may temporarily dampen the cryptocurrency’s price increases.

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