Key Indicator Signals Bottom in Sight

• Recent data from Santiment indicates a substantial decline in Ethereum’s transaction fees, reaching their lowest level since January.
• This decline is attributed to reduced user activity on the blockchain over the past month, impacting both the non-fungible token (NFT) and decentralized finance (DeFi) sectors.

After facing strong selling pressure earlier this week, the world’s second-largest cryptocurrency Ethereum (ETH) has managed to stay afloat above $3,000. After a strong Q1, Ethereum investors continue to remain hopeful for an upward price swing going ahead.

However, one must take notice of the key developments happening in the Ethereum ecosystem. Santiment’s latest report indicates a notable decrease in Ethereum’s [ETH] transaction fees, marking the lowest level since January. At the time of reporting, the average fee per transaction on the Proof-of-Stake (PoS) network stood at $2.34, showcasing an 84% drop from its year-to-date (YTD) peak of $15, recorded on March 5.

💸 #Ethereum‘s network costs just $2.07 to make a transaction, a far cry from the $15.21 that it cost back on March 4th when demand was excessively high. The market historically moves between sentimental cycles of feeling that crypto is going “To the Moon” or feeling that “Crypto… pic.twitter.com/OKjhmHnYQE

— Santiment (@santimentfeed) April 18, 2024

This decline in Ethereum’s network fees correlates with reduced user activity observed on the blockchain in the past month. Artemis’ data reveals a decrease in daily demand and engagement with Ethereum over the last 30 days. Since March 19, the daily count of unique addresses interacting with Ethereum has plummeted by 7%, leading to a drop in the number of unique on-chain interactions. With Ethereum completing 1.2 million transactions on April 17, there has been a 14% decline in daily transaction count over the past 30 days.

Impact on Ethereum’s NFT and DeFi Ecosystem

The decline in user activity on Ethereum has also impacted its non-fungible token (NFT) and decentralized finance (DeFi) sectors. NFT sales volume on the PoS network has significantly decreased over the past month, totaling $288 million in 30 days, marking a 57% decline, according to CryptoSlam. Additionally, Ethereum’s total value locked (TVL) in the DeFi vertical has dropped to $49 billion at press time, reflecting a 14% decrease since its YTD peak of $57 billion, as reported by DefiLlama.

As a result of this drop in the Ethereum network activity, the ETH price has turned out to be inflationary. This clearly hints at an uptick in the ETH coins being available in the circulating supply. This has put further downward pressure on the Ethereum (ETH) price. As of press time, Ethereum is trading 0.73% down at a price of $3,052 with a market cap of $367 billion. Also, the daily trading volumes have dropped by 31% to $13.84 billion.

Is ETH Bounce Back Possible Ahead?

Santiment suggests that the recent decline in Ethereum’s network fees could signal that its price has reached a potential bottom, hinting at a forthcoming rally, per the Crypto News Flash report. Monitoring ETH’s Age Consumed metric is crucial in assessing whether this is indeed the case. This metric tracks the movement of previously inactive coins.

An increase in ETH’s Age Consumed indicates a surge in the activity of long-held and dormant coins, signifying a notable change in the behavior of long-term holders. Conversely, a decrease in this metric suggests that these long-held coins remain idle in wallet addresses without being traded.

The Age Consumed metric serves as a reliable indicator for identifying local tops and bottoms in the market, as long-term holders typically refrain from moving their dormant coins. Therefore, any significant movement observed in this metric can lead to substantial shifts in market conditions, as reported by Crypto News Flash.

According to Santiment’s data, ETH’s Age Consumed experienced a significant uptick on April 18, reinforcing the possibility that a bottom may have been reached.