Ethereum (ETH) has been grappling with a significant price drop, losing 55% from its December peak of $4,000 to now trading below $1,800. While the price struggles, Ethereum’s transaction fees have fallen to their lowest level in nearly four years, drawing attention from investors and market watchers alike. Is this a sign of reduced network activity, or could it set the stage for an eventual market rebound?

Ethereum’s Transaction Fees Hit Four-Year Low

Recent data shows that Ethereum’s transaction fees have plunged to the lowest levels in almost four years. The decline in transaction costs makes Ethereum more accessible to retail investors, who have long been discouraged by high gas fees. With lower costs, users may find Ethereum more appealing, potentially encouraging a fresh wave of market interest.

The reduction in transaction fees is primarily due to a decrease in network activity. Santiment’s data indicates a sharp drop in daily active addresses, falling from 717,000 earlier this year to 461,000 in mid-March. This sharp decline in active addresses points to a slowdown in Ethereum’s network usage, contributing to the overall drop in transaction fees.

Sell Pressure and Layer-2 Solutions Contributing to Lower Fees

Another factor influencing Ethereum’s transaction fees is the growing sell pressure from long-term holders. Ethereum’s realized cap HODL wave has reached its lowest point since August 2023, signaling that more long-term investors are selling their holdings, further exerting downward pressure on the price and network activity.

In addition, the rise of Ethereum layer-2 solutions, such as Arbitrum, Base, and Optimism, has led to lower demand for Ethereum’s main network. These solutions offer faster speeds and cheaper transaction costs, drawing users away from Ethereum’s core blockchain and contributing to the overall fee reduction.

Ethereum Price Outlook: Consolidating Around $1,850

Despite Ethereum’s price drop, there has been some recent consolidation, with the price hovering around $1,850. However, Ethereum faces strong resistance at this level, and technical indicators suggest that further downside could be on the horizon. The Relative Strength Index (RSI) is currently at 37, which indicates that bearish momentum may be weakening. Meanwhile, the Stochastic Oscillator has entered the overbought zone, hinting at a potential pullback in the near future.

As of now, Ethereum is trading at $1,852, showing a 2.81% rise in the last 24 hours. However, it is still down by 12% over the past week, reflecting ongoing market pressure. For ETH to regain bullish momentum, it needs to break through the $2,000 level and hold above it.

Conclusion: Will Ethereum Recover?

Ethereum is facing significant challenges as its price struggles to maintain momentum. The decline in transaction fees and lower network activity indicate weakening demand for the Ethereum network. However, the drop in fees could also be an opportunity for retail investors to re-enter the market. With Ethereum’s layer-2 solutions growing in popularity, the network’s long-term position remains uncertain.

In the short term, Ethereum’s price recovery will depend on whether it can break above the $2,000 mark and maintain strength above that level. Until then, Ethereum will continue to battle resistance and market pressures that have kept it below its recent highs.