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Ethereum fees drop to 7-month low amid signs of rising utility, is it bullish for ETH?

ethereum, Ethereum fees drop to 7-month low amid signs of rising utility, is it bullish for ETH?
ethereum gas fees lowest since Dec 2020, Photo by Zoltan Tasi on Unsplash
  • Ethereum average fees swooped to a 7-month low of $2.19, the lowest since December 2020
  • Points to a sign of rising utility of the largest smart contract platform in the world
  • ETHUSD technical setup points to a bullish breakout possibility

JAIPUR (Coinchapter.com) – The Ethereum network is in a far better place right now. Compared to where it was in May this year. Gas fees on the largest smart contract platform have dropped to a 7-month low of $2.19. According to the data that Santiment came up with yesterday.

ethereum, Ethereum fees drop to 7-month low amid signs of rising utility, is it bullish for ETH?
Ethereum gas fees lowest since December 2020, Source: Santiment

The on-chain metrics provider posits that the drastic drop in gas fees implies a solid outlook for Ethereum with respect to utility. “This is a promising sign that $ETH’s utility can rise with little impact of fees standing in the way of healthy circulation,” read Santiment’s tweet.

Gas fees are transactions fees that Ethereum users pay for the successful execution of applications on the network.

The DeFi boom this year paved the way for the exponential rise in gas fees. Ethereum’s network usage suffered severe setbacks. Numerous smart contract applications let users engage in peer-to-peer transactions for permissionless lending, borrowing, trading, staking, etc.

Also Read: DeFi boom underway as Bitcoin rally stalls: UNI, COMP, and MKR in focus

Is It Bullish For ETH?

Last Wednesday, Messari researcher Ryan Watkins posted an extensive Twitter thread in which he talked about the variables that will dictate DeFi valuations in the long run. And how will that relate to ETH.

The discussion eventually boiled down to the pricing power of DeFi protocols. What’s is the maximum price that users would need to pay for using various DeFi protocols.

Also Read: Is Decentralized Finance (DeFi) the future, or a temp solution?

“On one hand, open-source development and permissionless protocols lead to low switching costs (competitors can copy your code and users can leave in an instant), so its possible protocols will have low pricing power over users.”, said Ryan.

Then he brought Ethereum and the network’s native cryptocurrency token ETH into the picture. To discuss how both will capture value if DeFi protocols achieve lower usage costs. “On one hand, lower margins for DeFi protocols means more surplus to users, both on the supply and demand side (DeFi protocols are marketplaces). But it also means Ethereum captures a higher % of total fees per transaction as gas becomes a larger portion relative to protocol fees.”, commented the Messari researcher.

And according to Mr. Watkins, the scenario mentioned above might lead to “Ethereum may end up capturing more value from DeFi than DeFi protocols themselves.”

Summarising the discussion, Ryan said, “If DeFi protocols do indeed have low pricing power, it would be the cherry on top for the already bullish case for ETH.”

Ethereum Technical Setup

The daily ETHUSD chart shows Ether trading within a descending channel with the higher and lower bounds coinciding with $2900 and $1800 price levels. The trend has dominated Ethereum price charts since the May 19 crash. At $2141, ETH looks well supported above the 20-day and 200-day moving average (MA) waves.

ethereum, Ethereum fees drop to 7-month low amid signs of rising utility, is it bullish for ETH?
ETHUSD trading in a descending channel but remains supported above 200-Day MA, Source:  ETHUSD On TradingView.com

The bulls have a decent at attempting a breakout from the bull flag formation. And should such a breakout scenario play out, Fibonacci extension calculations (from $1726 swing low to $2419 swing high) indicate that a rally to $2259 (78.6% extension level) is on the cards. However, $2850 coinciding with the 161.8% Fibonacci extension level remains a crucial resistance worth surmounting.

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Himadri Saha

Himadri is an active investor in cryptocurrencies and upcoming blockchain technology projects. He has been a part of the digital asset space since 2017 and has held multiple positions as Social Media Manager, Assistant Editor, Sponsored Content Manager, Cryptocurrency Journalist roles in reputed news outlets like NewsBTC, Bitcoinist and CryptoPotato. He has also helped numerous blockchain projects gain prominence through terse and succinct marketing/technical content. Himadri comes with a marketing and engineering background, and has worked with reputed names such as GE Healthcare, Volvo Trucks and Polycom before moving into crypto.

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