Ethereum’s daily transaction fees have dropped below $1 million for the first time since September 2024, marking a significant decline in network activity. On February 8, Ethereum generated just $731,472 in daily fees, according to Token Terminal. This drop mirrors previous slumps in August–September 2024 and as far back as November 2020.
What’s Behind the Decline?
Several factors contribute to Ethereum’s decreasing fee revenue:
- Layer-2 Adoption: Networks like Arbitrum, Optimism, and Base are successfully reducing congestion on Ethereum’s mainnet, shifting transaction activity away from the base layer. While this lowers costs for users, it also means Ethereum collects fewer fees.
- Increased ETH Supply: Since April 2024, Ethereum has experienced supply growth, reversing the deflationary effects of The Merge. More ETH in circulation could pressure prices, especially when network demand weakens.
- Rising Competition: Solana and Tron have made significant gains, particularly in DeFi and stablecoin transactions. Both networks have outpaced Ethereum in fee generation over the past three months.
- Internal Ethereum Foundation Issues: Leadership conflicts and governance concerns within the Ethereum Foundation have also cast a shadow over ETH’s future direction.
The Bullish Case: Whales Keep Accumulating
Despite these concerns, large investors remain confident. On February 7, accumulation addresses purchased 330,705 ETH—worth $833 million—marking the largest single-day inflow ever recorded. This suggests that some see Ethereum’s current valuation as a buying opportunity rather than a cause for concern.
Buy, Sell, or Hold?
Ethereum is at a crossroads. While declining fees signal reduced demand, long-term investors might view this as a temporary slowdown rather than a fundamental weakness. The growth of layer-2 solutions could make Ethereum more scalable and efficient in the long run, but competition from other blockchains cannot be ignored.
As always, this is not financial advice—investors should conduct their own research before making any decisions.
