Ethereum Price Crashes as Gas Fees Drop 90%, is ETH Bottom in?

Ethereum (ETH) gas fees dropped below 1 Gwei on February 7, a 93% drop from the 30-day average of 13 Gwei. The sudden collapse in gas fees makes it almost comparable to fees on the wildly popular Solana (SOL) blockchain. Despite this incredible achievement, Ethereum price dropped 2.40% yesterday and is down -0.48% today and trades around $2,613. Will ETH price bottom here and catalyze a bull run?

Why is Ethereum Price Crashing as Gas Fees Plummet More Than 90%?

Due to the high correlation with Bitcoin (BTC),  Ethereum prices continue to drop despite the increase in gas limits on February 6, which dropped gas fees by more than 90%.

At the time of writing, the transaction fee on Solana costs $0.04, while Ethereum’s gas price hovers around $0.05. This achievement from Ethereum comes after validators agreed to raise the gas limits to nearly 32 million units. This upgrade to the network came without the need for a hard fork after almost half of the validators supported increasing the gas limits. In a nutshell, increasing gas limits allows more transactions to be bundled in a block. As a result, the gas fees have plummeted, which is a fundamentally bullish development and could inflate ETH’s value.

Many are touting this move as “solving the scaling problem” that plagued Ethereum for years. The fact that the gas fees are comparable to the competitor Solana makes it much more alluring. It could be a catalyst that ignites ETH to form a bottom formation and a bullish Ethereum price reversal.

Is ETH Forming a Bottom?

From a technical standpoint, Ethereum price is approaching the key support level at $2,497, which is the midpoint of the daily wick formed after the February 3 crash. So, yes, ETH is forming a bottom around $2,500, and the probability of a reversal is high. The Relative Strength Index (RSI) and Awesome Oscillator (AO) support this outlook as they flash signs of reversal. The RSI has hit the oversold zone after six months, and AO is flashing green histograms below the mean level, suggesting a depletion of bearish momentum and hinting at a resurgence of bullish momentum.

Key Levels to Book Profits

After a bounce from the key support level of $2,497, investors must pay close attention to $2,921 & $3,000, which are Monday’s high and 200-day Simple Moving Average (SMA). These levels could pose stiff resistance to the Ethereum price’s recovery rally. Overcoming these hurdles will open the path to critical overhead barriers at $3,119 and $3,306. Only after flipping these into a support floor will push ETH to $4,000 and beyond.

Conclusion

In conclusion, the significant drop in Ethereum gas fees by over 90% is a fundamentally bullish development that could potentially catalyze a bull run. Despite the current price drop, Ethereum is forming a bottom around $2,500, and technical indicators suggest a high probability of a reversal. As Ethereum’s gas fees become comparable to those of Solana, it may regain its attractiveness, leading to a potential price surge. Ethereum price prediction notes a move to $4,000 is possible after a bottom around $2,500.

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