For the first time since September 2024, daily transaction fees on the Ethereum network have fallen below the $1 million threshold. On February 8, the network generated only $731,472 in transaction fees, marking a five-month low.

This is a rare occurrence: the last time Ethereum recorded such low transaction fee revenues was between August and September 2024, and before that, in November 2020.

What‘s Behind This Drop?

The crypto market has experienced significant fluctuations over the past year. While Bitcoin reached new highs following the approval of spot ETFs in markets like the US and Hong Kong, Ethereum lagged behind.

One key factor affecting Ethereum‘s performance is the increasing total supply of ETH. Since April 2024, Ethereum‘s supply has been steadily growing, reversing the deflationary trend introduced by the Merge in 2022. The total ETH supply has now surpassed pre-Merge levels.

Lower Fees, but Less Activity?

Ethereum‘s transition to a proof-of-stake model and the introduction of the EIP-1559 protocol have ensured that a portion of transaction fees are burned, reducing the circulating supply. However, when network activity remains low, less ETH is burned, potentially leading to further supply increases.

Additionally, layer-2 solutions such as Optimism and Arbitrum have eased congestion on the Ethereum network by handling transactions off the main blockchain. This reduces costs on the mainchain but may also shift activity away from Ethereum itself and onto these second-layer solutions.

Competition Gaining Ground

Ethereum has long dominated the market as the leading platform for decentralized applications (DApps) and smart contracts, but other networks are gaining traction.

Tron is becoming increasingly popular for stablecoin transactions. Solana is rapidly growing within the DeFi market, attracting more users, especially in the memecoin sector.

Both networks have surpassed Ethereum in total fees generated over the past three months.

How Are Investors Reacting?

Despite these challenges, interest in Ethereum remains strong. On February 7, as much as **330,705 ETH ($833 million)** was purchased by large investors. This indicates that many still have long-term confidence in Ethereum.

Ethereum remains a powerhouse in the crypto industry, but the landscape is shifting. Whether this decline in transaction fees is temporary or signals a structural change will become clearer in the coming months.

Disclaimer: This is not financial advice. Always conduct your own research and seek professional guidance.