Gas fees on the Ethereum network have experienced a significant drop to their lowest levels in six months, even as the price of Ether saw a slight rally over the weekend. 

Analysts from crypto analytics platform Santiment suggest that this decline in gas fees could be a signal for an upcoming altcoin rally.

According to Santiment’s post on X, the average fee for an Ethereum transaction fell as low as $1.12. 

The platform explained that transaction fees often follow cycles of investor sentiment, swinging between extreme optimism and pessimism. 

Gas Fees Drop During Market Bottoms

Gas fees tend to peak during market tops and then decline to lower levels during market bottoms.

Earlier this year, gas fees on Ethereum reached an eight-month high in February due to a surge in interest for the experimental ERC-404 token standard. 

However, the current low gas fees could indicate a potential increase in activity on the Ethereum network, potentially leading to an altcoin rally.

Santiment suggests that the recent retracement in the markets, coupled with the reduced demand and strain on the network, may result in a quicker turnaround for Ethereum and associated altcoins than expected.

🤑 #Ethereum's average fee level has dipped to just $1.12 per network transaction, the lowest average cost in a day since October 18th.

Traders historically move between sentimental cycles of feeling that #crypto is going "To the Moon" or feeling that "It Is Dead", which can… pic.twitter.com/8b8rLMLyIf

— Santiment (@santimentfeed) April 28, 2024

CoinGecko data shows that Ether has experienced a 4.3% gain in the past week, supporting the notion of a slight rally in its price. 

Additionally, on April 27, three Ethereum layer-2 networks—Optimism (OP), Arbitrum (ARB), and Polygon—were among the top five best-performing assets in the top 50 cryptocurrencies by market cap, with gains of 11.7%, 3.5%, and 2.8% respectively.

However, the reduced network activity has led to an increase in the circulating supply of Ethereum. 

Over the past month, 74,458 new ETH were issued, while only 57,516 were burned, resulting in a net supply increase of 16,979 ETH, as reported by ultrasound.money data. 

This stands in contrast to the previous five months, which saw a steady deflation. It’s worth noting that since Ethereum’s transition to a proof-of-stake consensus mechanism, known as ‘The Merge,’ on September 15, 2022, more than 437,000 ETH has been burned.

Ethereum Sees $365 Million in Revenue in Q1

The Ethereum network reported a robust income of $365 million in the first quarter of 2024, an impressive year-on-year revenue growth of 155%. 

As reported, Ethereum’s Q1 income represents a staggering 200% increase compared to the $123 million profit recorded in Q4 2023.

A major contributing factor to this substantial growth was the surge in decentralized finance (DeFi) activity during the quarter, driving heightened network participation.

Ethereum’s fee revenue, generated through user transactions, reached a notable milestone of $1.17 billion in Q1, marking a remarkable 155% increase from the same period in 2023 and an 80% upswing from the previous quarter. 

The amplified network activity, fueled by the surge in DeFi applications, has propelled Ethereum’s average daily transactions in 2024 to surpass last year’s figures.

The current average of 1.15 million daily transactions is in close proximity to the peak levels witnessed during Ethereum’s momentous run in 2021.