Ethereum's trading fees have fallen to a lowest point in four years, indicating a significant change in activity on the chain.
This decline is due to networks facing challenges such as poor market performance and weakening of the underlying.
Ethereum faces concerns about lower fees and inflation
According to IntotheBlock, Ethereum total transaction fees fell nearly 60% in the first quarter of 2025, falling to around $208 million as of April 4th. The company noted that this is the lowest level since 2020.
“Total ETH fees have fallen to the lowest levels since the quarter, driven primarily by increased gas restrictions and transactions moving to L2S,” IntotheBlock said.
Ethereum rates. Source: IntotheBlock
Several factors contribute to this decline. The biggest driver is the adoption of Layer 2 networks, especially Coinbase's base. The Dencun upgrade of Ethereum, launched in March 2024, made transactions on these scaling layers much cheaper.
As a result, more users are bypassing Ethereum's mainnet and shifting to faster, cost-effective alternatives. According to L2Beat, the base currently handles more than 80 transactions per second, leading all other Layer 2 networks.
Despite the benefits of lower fees, the underlying indicators of Ethereum show signs of tension.
Michael Nadeau, founder of Defi Report, flagged a sharp drop in ETH burn rates. He said ETH has burned major platforms like Uniswap, Tether, Metamask and 1inch, collapsed more than 95% since November 2024.
Nadeau explained that the decline in retail enthusiasm and slower than expected scaling from the L2 contributed to lower deflationary pressures in Ethereum.
“ETH's annual inflation rate has reached 0.75%. We should expect it to continue to rise above BTC inflation, and we should also expect the basics of Ethereum to continue to erode over the next year,” he added.
Meanwhile, the network's financial performance reflects these concerns. ETH prices exceeded 45% in the first quarter of 2025, marking its worst quarterly performance since 2022.
Ethereum quarterly performance from 2022 onwards. Source: Coinglass
Compared to Bitcoin, Ethereum also performed poorly, losing 39% of its value against BTC this year. That decline has pushed the ETH/BTC ratio to its lowest point in nearly five years.
Still, long-term investors have not setbacked. Intotheblock noted that the Ethereum whales have accumulated over 130,000 ETH as their lowest price since November 2024 fell below $1,800.
Beyond that, industry experts believe the upcoming Pectra upgrades scheduled for May could provide a fresh start to the assets.
According to them, Pectra will help restore confidence and drive new growth throughout the Ethereum ecosystem with improved wallet functionality and improved user experience.
