Gas fees on the Ethereum network have reached a six-month low, despite a slight rally in the price of Ether over the weekend. Analysts from crypto analytics platform Santiment suggest that this decrease in gas fees could signal an upcoming altcoin rally.
Santiment noted that transaction fees on Ethereum historically fluctuate between periods of high sentiment, marked by elevated fees, and low sentiment, characterized by lower fees. This pattern suggests that fee levels can reflect market sentiment, with peaks often coinciding with market tops and troughs aligning with market bottoms.
Gas fees on Ethereum soared to an eight-month high in February, driven by increased interest in the ERC-404 token standard. However, they have now declined to a resting state, signaling potential future activity upticks on the Ethereum network and the beginning of an altcoin rally.
Despite the decrease in gas fees, the price of Ether has experienced a slight rally, gaining 4.3% in the last week. Additionally, tokens associated with Ethereum layer-2 networks, such as Optimism, Arbitrum, and Polygon, have performed well, with three of them ranking among the top five best-performing assets in the top 50 cryptocurrencies by market cap.
While network activity has decreased, the circulating supply of Ethereum has surged to its highest point in the last month. Over the past 30 days, new ETH issuance has outpaced burning, resulting in a net supply increase. This contrasts with the previous months, which saw steady deflation in ETH supply.
Despite recent supply dynamics, Ethereum has witnessed significant burning of ETH since the transition to a proof-of-stake consensus mechanism, known as the Merge, in September 2022. Over 437,000 ETH has been burned during this period.
The decline in Ethereum gas fees, coupled with price movements and circulating supply dynamics, could potentially pave the way for an altcoin rally. The ongoing evolution of the Ethereum network and its transition to proof-of-stake continue to shape market dynamics and investor sentiment.
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