Ethereum Fees Crash 50% as User Activity Drops and ETFs See Outflows

March 23, 2025 by Mutuma Maxwell

• Ethereum transaction fees have dropped by 50 percent in the last seven days.
• The decline is linked to a significant slowdown in on-chain activity and user engagement.
• Ethereum’s scalability issues continue despite Layer 2 adoption and protocol upgrades.

Ethereum network activity has slowed sharply, leading to a 50% drop in transaction fees over the past seven days. This decline reflects a broader drop in on-chain engagement, raising concerns among traders and developers. Market watchers are now assessing the long-term implications for Ethereum’s scalability and ecosystem health.

Ethereum Fees Drop Amid Diminishing On-Chain Activity

Ethereum’s gas fees have decreased sharply because network activity slowed down and user demand reduced. The transaction costs currently stand at an average level indicating that network congestion is minimal along with reduced smart contract activities. Ethereum’s mainnet encounters diminishing interest even after its protocol developers make improvements.

The Ethereum network’s scalability concerns throughout its history have affected both transaction fees and network speed capabilities. Developers established Layer 2 solutions to overcome the problem by moving operations out of the main blockchain. However, the initiatives implemented to mitigate the usage decrease have failed to stop the entire network from being used less.

Several users, along with decentralized applications, have shifted their operations to Solana and Avalanche because these platforms provide faster and cheaper transaction capabilities. The shift in user base from Ethereum has produced an ecosystem expansion and diminished Ethereum’s market share in core sectors. The combination of factors has caused both charge revenues and network transaction processing speeds to decrease.

ETH Performance Lags Behind as ETF Outflows Intensify

The Ethereum price shows significant weakness because its current market value stands at $1,970, a 40% decrease since the beginning of the year. ETH struggles to keep up with other market assets due to wider market declines, which creates doubts about its short-term performance. Both investors and the market evaluate the massive reduction in on-chain demand and decreasing transaction levels.

Since nine days ago, ETH spot ETFs have withdrawn 142,564 ETH, which corresponds to approximately $280 million. The recent ETF inflow trend indicates institutions believe differently from earlier expectations, which predicted market growth through ETF activity. Even after the U.S. provided regulatory clarity, the market sentiment remains damaged.

The ETFs launched with high expectations, hoping to mirror the success of Bitcoin’s investment products earlier in the year. Ethereum generally maintains fee reductions but its waning market performance seems to deter investors from interest. Capital keeps draining away from Ethereum-linked assets because of this effect.

Broader Risks Add Pressure to Ethereum’s Market Position

Ethereum’s market performance suffers due to several macroeconomic factors that undermine investor trust in the asset. Trade risks, economic uncertainties, and global instability push institutions to minimize their exposure to various forms of danger. The global headwinds have raised market unpredictability levels while ensuring a slow entry of institutional funds into crypto assets, especially ETH.

Institutional investors’ quick responses to macroeconomic indicators drive them to reorganize their portfolios to protect their investments from lengthy risks. Underperformance in Ethereum derives from these internal scalability limits, as institutional investors demonstrate risk-aversion following market signals of caution. Multiple adverse forces are creating doubt about Ethereum’s capacity to grow in the future.

Ethereum continues to lead the decentralized applications market, even though other networks show rising competitive strength. The crypto ecosystem adopts Solana, Binance Smart Chain, and other platforms, which provide inexpensive and rapid capabilities while attracting large user bases.