Ethereum transaction fees drop significantly in August

Ethereum (ETH) users recently observed a significant transformation in the blockchain landscape, witnessing a remarkable drop in daily transaction fees on Layer 1 (L1). On August 27th, these fees hit a six-month low, totalling just 1,719 ETH, roughly equivalent to $2.8 million.

This plunge was staggering, constituting a jaw-dropping 97% decrease from the all-time high of 84,000 ETH registered earlier in the year on May 1st. Simultaneously, data from IntoTheBlock disclosed that the average daily fee per transaction underwent a substantial 70% reduction.

The dramatic decline in network fees on Ethereum’s primary Layer 1 can be attributed to a medley of factors. Foremost among them is the reduction in network activity, with daily transaction volume plummeting by a substantial 78% from its year-to-date zenith on March 14th, which amounted to $13.42 billion.

Furthermore, the increasing adoption of Layer 2 (L2) scaling solutions in recent months has played a pivotal role in diminishing the reliance on Ethereum’s L1 for conducting transactions.

The repercussions of this fee reduction extend beyond the wallets of users. Ethereum’s network revenue has also suffered, declining by 22% over the past 30 days, as reported by data sourced from Token Terminal.

One of the contributing factors to Ethereum’s recent challenges lies in its close correlation with Bitcoin (BTC). On August 17th, Bitcoin endured its most substantial single-day sell-off of the year, briefly breaching the $25,000 price threshold. Given the strong link between these two cryptocurrencies, Ethereum bore the brunt of this event.

Data from Coinglass pointed to a significant decrease in Ethereum’s open interest, which, at the time of reporting, stood at $4.69 billion, signifying a 29% reduction since the deleveraging event. On August 23rd, Ethereum’s open interest hit a yearly low of $4.67 billion.

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