Ethereum Fees Hit 4-Year Low as Activity Shifts to L2 Networks

Ethereum’s transaction fees have dropped to their lowest point over four years, marking a significant shift in on-chain activity.

The decline comes as the network faces mounting challenges, including falling market performance and weakening fundamentals.

Ethereum Faces Declining Fees and Inflation Concerns

According to IntoTheBlock, Ethereum’s total transaction fees dropped by nearly 60% in Q1 2025, falling to roughly $208 million as of April 4. The firm noted that this was their lowest level since 2020.

“Total ETH fees decreased to their lowest level since 2020 this quarter, primarily driven by the gas limit increase and transactions moving to L2s,” IntoTheBlock stated.

Ethereum Fees. Source: IntoTheBlock

Several factors have contributed to this decline. The biggest driver is the adoption of Layer-2 networks, especially Coinbase’s Base. Ethereum’s Dencun upgrade, which 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, Base currently processes over 80 transactions per second, leading all other Layer-2 networks.

Despite the benefits of lower fees, Ethereum’s underlying metrics are showing signs of strain.

Michael Nadeau, founder of The DeFi Report, flagged a steep drop in ETH burn rates. He noted that ETH burned through major platforms like Uniswap, Tether, MetaMask, and 1inch, which collapsed by more than 95% since November 2024.

Nadeau explained that fading retail enthusiasm and the slower-than-expected scaling from L2s are contributing to Ethereum’s reduced deflationary pressure.

“ETH’s annualized inflation is now 0.75%. We should expect it to continue to rise, exceeding BTC inflation. We should also expect Ethereum’s fundamentals to continue to erode over the next year,” he added.

Meanwhile, the network’s financial performance reflects these concerns. ETH’s price fell over 45% in Q1 2025, marking its worst quarterly performance since 2022.

Ethereum Quarterly Performance Since 2022. Source: CoinGlass

In comparison to Bitcoin, Ethereum has also underperformed, losing 39% of its value against BTC this year. That drop has pushed the ETH/BTC ratio to its lowest point in nearly five years.

Still, long-term investors are not backing down. IntoTheBlock pointed out that Ethereum whales accumulated over 130,000 ETH as the price dipped below $1,800—its lowest since November 2024—signaling strong buy-the-dip sentiment.

Beyond that, industry experts believe the upcoming Pectra upgrade, scheduled for May, could give the asset a fresh start.

According to them, Pectra can help restore confidence and drive renewed growth across the Ethereum ecosystem with its improved wallet functionality and user experience.

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