Ethereum: Fees and Open Interest hit record lows

• The total fees on Ethereum fell to a six-month low on Sunday.
• ETH’s Open Interest also plummeted to its year-to-date low on 23 August.

The total daily fees paid by users to complete transactions on Layer 1 (L1) blockchain Ethereum [ETH] fell to a six-month low of 1,719 ETH ($2.8 million) on 27 August, according to data from on-chain analytics platform IntoTheBlock. 

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This represented a 97% decline from this year’s total fee all-time high of 84,000 ETH, recorded on 1 May. Within the same period, the average daily fee paid per transaction plummeted by 70%, data from IntoTheBlock showed.

Source: IntoTheBlock

The decline in network fees on the leading L1 is due to a drop in network usage and the growth in the adoption of Layer 2 (L2) scaling solutions in the past few months.

After climbing to a year-to-date high of $13.42 billion on 14 March, the daily transaction volume on Ethereum has since fallen by 78%. 

Source: IntoTheBlock

As expected, the steady decline in network fees resulted in a decrease in network revenue. According to data obtained from Token Terminal, Ethereum’s network revenue declined by 22% in the past 30 days. 

ETH futures contracts at their lowest level this year

On 17 August, leading coin Bitcoin [BTC], suffered its largest single-day sell-off of the year, which sent it to trade briefly below the $25,000 price mark. Due to its statistically significant positive correlation to the coin, ETH has since experienced a liquidity exodus from its futures market.

According to data from Coinglass, ETH’s Open Interest has since trailed downward. As of this writing, it was pegged at $4.69 billion, having fallen by 29% since the deleveraging event.

On 23 August, the liquidity flush-out caused the alt’s Open Interest to reach its year-to-date low of $4.67 billion.

Source: Coinglass

This type of significant decline in an asset’s Open Interest is generally interpreted as a negative sign for the underlying asset. It means that investors are closing out their positions in their numbers as market sentiment continues to be overwhelmingly bearish. 

While ETH’s price maintained support at $1600, it continued to trade within a narrow range at press time, leaving many investors uncertain about its next price direction. While a catalyst is being awaited, many have decided to hedge against any further risks by exiting their positions. 

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Investors who have not closed their ETH positions since the deleveraging event are betting against ETH’s price. This is evident from the negative funding rates across crypto exchanges since 17 August, according to Coinglass.

This indicated that there has been a significant amount of short-selling pressure on ETH, which could contribute to further price declines.

Source: Coinglass