Last Updated: 7 August 2022
Ethereum is becoming increasingly interesting for investors ahead of the Merge. This is because Ethereum’s transaction costs are at their lowest level since December 2020. This makes ETH more attractive to use.
Ethereum continues to surprise ahead of The Merge, in which the blockchain will move from Proof of Work (PoW) to Proof of Stake (PoS). According to a survey by Kaiko, at the beginning of this month, Ethereum recorded the lowest average transaction cost in almost two years.
In fact, these transaction fees are currently $3. This is a huge difference from the bull market of 2021, where these costs could run up to several hundred dollars per transaction. Last year, transaction costs peaked in May 2022.
This was, in the period, just before the entire crypto market went into a rut. Back then, one ETH transaction also cost up to $200. At the time, this coincided with the sale of the land of the Bored Ape Yacht Club, which uses the Ethereum network. This hype was so great that ETH transaction costs rose very high within a short time.
How is this possible?
Unfortunately, the cause of these low transaction fees is not exactly positive. According to Kaiko’s research, the drop in transaction costs was caused by the bear market. “In bear markets, volumes on centralised exchanges plummet because the general public interest declines,” Kaiko explains.
On the other hand, this has positive aspects for Decentralised Finance (DeFi), for example. “DeFi still has enough use cases during a bear market,” Kaiko said. This is because the biggest driver for using this branch of crypto is the low transaction costs.
Many people avoided DeFi during the bull market because the costs were so high at the time. So even though the transaction costs have gone down for a nasty reason, it also has an advantage.