- Ethereum’s (ETH) average gas price has dropped to a record low of 1 gwei (approximately$0.06) in 2025, signaling reduced transaction costs.
- The decline in gas fees is likely due to reduced network activity rather than increased scalability.
- Ethereum’s Layer 2 (L2) protocols have seen cheaper transaction costs since the 2024 blobs update, but this may have shifted demand away from Layer 1 (L1).
- Active Ethereum addresses have declined from 403,000 in December 2024 to 380,000 in February 2025, reflecting reduced network usage.
- ETH’s supply has risen to pre-Merge levels, potentially dampening market sentiment.
- The Coinbase Premium Index showed a spike during ETH’s recent price dip, indicating U.S. investors took advantage of the lower prices.
- ETH remains below$3,000, and its recovery depends on broader market conditions, including macroeconomic factors like the U.S. January Jobs report.
Ethereum’s Gas Price Hits Record Low
Ethereum’s average gas price has plummeted to an unprecedented 1 gwei, equivalent to roughly$0.06, marking a significant milestone in 2025. Gas fees, which represent the cost users pay to execute transactions on the Ethereum blockchain, are a critical metric for gauging network activity and scalability. While lower fees might initially seem like a positive development, they often reflect reduced demand or usage on the network.
The current drop in gas prices appears to be tied more to declining network activity than to improvements in scalability. Historically, Ethereum’s gas fees have surged during periods of heightened activity, such as price rallies or major network events. For instance, during Ethereum’s March 2024 peak, when ETH reached$4,000, average base fees skyrocketed to over 90 gwei. Similarly, smaller spikes above 25 gwei have consistently coincided with local price tops. The current low fees, however, suggest a quieter network, with fewer active users and transactions.
The Impact of the Blobs Update and Layer 2 Adoption
Ethereum’s 2024 blobs update, which aimed to improve scalability and reduce transaction costs, has played a significant role in shaping the current state of the network. The update successfully lowered fees, particularly on Layer 2 (L2) protocols, making them more attractive for users. However, this shift has come at a cost to Ethereum’s Layer 1 (L1) network, as much of the demand has migrated to L2 solutions.
While L2 adoption has made transactions cheaper and faster, it has also contributed to reduced activity on the main Ethereum chain. This trend is evident in the declining number of active daily addresses, which fell from 403,000 in December 2024 to 380,000 in February 2025. The reduced activity on L1 raises questions about Ethereum’s ability to sustain its dominance as the go-to blockchain for decentralized applications (dApps) and smart contracts.
Declining Network Activity and Its Implications
Periods of low gas fees on Ethereum have historically coincided with reduced network activity and user engagement. For example, during Ethereum’s price drop and local bottom between August and October 2024, average gas fees and active daily addresses both declined. This pattern is repeating itself in early 2025, as Ethereum struggles to regain momentum following its December 2024 rally to$4,000.
Adding to the challenges, Ethereum’s supply has risen to pre-Merge levels, which could weigh on market sentiment. The Merge, a major upgrade in 2022, introduced a deflationary mechanism by reducing ETH issuance. However, the recent increase in supply suggests that this deflationary effect may be waning, potentially dampening investor confidence.
Investor Behavior and the Coinbase Premium Index
Despite the challenges, there are signs of resilience among Ethereum investors. The Coinbase Premium Index, which tracks U.S. investor demand, spiked positively during Ethereum’s recent price dip. This indicates that investors took advantage of the lower prices to accumulate ETH during the deleveraging event on February 3, 2025.
However, the index has since eased to a neutral level, reflecting a more cautious approach among investors. If the index remains in positive territory, it could signal renewed buying interest and support a potential price recovery. Conversely, a drop into negative territory could limit Ethereum’s ability to rebound in the short term.
The Road Ahead for Ethereum
Ethereum’s price has remained below$3,000 since February 3, 2025, as the market grapples with reduced network activity and shifting investor sentiment. The altcoin’s recovery prospects will likely depend on a combination of internal and external factors. Internally, Ethereum must address the challenges posed by declining L1 activity and rising supply. Externally, macroeconomic conditions, such as the U.S. January Jobs report, could influence market sentiment and drive price movements.
While the current environment presents challenges, Ethereum’s long-term potential remains intact. The network’s ongoing transition to a more scalable and efficient ecosystem, coupled with its strong developer community, positions it well for future growth. For now, investors and analysts will be closely watching key metrics, such as gas fees, active addresses, and the Coinbase Premium Index, to gauge Ethereum’s next move.
Conclusion
Ethereum’s record-low gas prices highlight a complex interplay of factors shaping the network’s current state. While reduced fees may seem like a win for users, they also reflect declining network activity and shifting demand toward Layer 2 solutions. The drop in active addresses and the rise in ETH supply further underscore the challenges facing the network.
However, investor behavior, as evidenced by the Coinbase Premium Index, suggests that there is still confidence in Ethereum’s long-term prospects. Whether ETH can recover from its recent struggles will depend on its ability to adapt to these challenges and capitalize on future opportunities. As the market awaits further developments, Ethereum’s journey in 2025 remains a story of resilience, innovation, and evolving dynamics.
