Low Ethereum Fees Point to Potential Alt Season on the Horizon

Santiment predicts that Ethereum’s low fees could signal the start of an altcoin rally, and other experts seem to agree.

The Ethereum network recently saw a big drop in gas fees to a six-month low, which Santiment suggests could indicate a potential upcoming altcoin rally. Adding to the positive outlook, the performance of layer-2 tokens like Optimism and Arbitrum has been robust, while Ethereum's circulating supply has also seen an increase. This convergence of factors—low gas fees, strong layer-2 token performance, and rising Ethereum supply—could drive a rebound in ETH and other altcoins. Expert analyses and market indicators also hint at a possible end to Bitcoin's bull run, further setting the stage for an altcoin season.

Alt Season Beckons as Ethereum Fees Drop

Gas fees on the Ethereum network recently dropped to a six-month low, reaching $1.12 per transaction on Apr. 27, according to the crypto analytics platform Santiment. Now, Santiment's analysts suggest that these low transaction fees often indicate a "resting state" for the market, which has historically preceded a rally in altcoin prices.

The drop in fees is in stark contrast to the situation in February when Ethereum gas fees hit an eight-month high because of a surge in interest around an experimental token standard known as ERC-404. This spike in fees is typically aligned with market peaks, while the current lows may suggest an upcoming increase in network activity and, potentially, a broader altcoin rally.

Adding to the potential for increased market activity, the native tokens of Ethereum layer-2 networks like Optimism, Arbitrum, and Polygon have also performed exceptionally well recently. On Apr. 27, these tokens were among the top gainers within the top 50 cryptocurrencies by market cap.

Meanwhile, Ethereum’s circulating supply has reached a monthly high. Over the past 30 days, the net increase in Ethereum's supply amounted to 16,979 new ETH. This is a big shift from the previous five months of steady deflation. Despite this increase, the total number of burned ETH since the network's transition to a proof-of-stake model with the Merge in September of 2022 still stands at over 437,000 ETH.

This combination of low gas fees, an uptick in layer-2 token performance, and an increase in Ethereum's circulating supply could potentially catalyze a rebound in ETH and related altcoins, shaking up the crypto market sooner than many might anticipate.

Altcoin Market Shows Promise

Many traders in the industry seem to agree with Santiment. Over the weekend, the altcoin market cap saw a decent increase, but according to popular trader Skew, it still needs to break the pattern of peaking early in the week.

Other discussions about the altcoin market by trader and commentator Moustache were mostly bullish. He also predicted an incoming altcoin season that could even rival the surge seen in 2017. He based his prediction on movements in the Tether (USDT) dominance chart, noting that a decline in USDT dominance usually correlates with an increase in altcoin values. He described the current chart activities as a "backtest" of a broken rising trendline, indicating potential for major growth in altcoins.

Daan Crypto Trades, another trader, remarked that the weekend's price action was encouraging but he does not expect big moves in Bitcoin until the Chicago Mercantile Exchange (CME) opens back up.

What is Altcoin Season?

An altcoin, short for "alternative coin," is any cryptocurrency that isn't Bitcoin. Altcoins were developed to offer features or benefits that are not provided by Bitcoin, like faster transaction speeds, lower fees, enhanced privacy, or the capability for smart contracts. Examples of altcoins include Ethereum, Litecoin, Dogecoin, and Cronos. These cryptocurrencies act as more than just digital payment methods by providing distinct advantages and functionalities.

Altcoin season describes a period when altcoins experience big price increases and outperform Bitcoin. This often happens when Bitcoin's market dominance, which used to be near 100% in the early days of cryptocurrency, decreases as altcoins gain in popularity and market cap. Traders might take this as an opportunity to diversify their portfolios toward altcoins, especially during a bullish sentiment in the broader cryptocurrency market.

Several factors can contribute to an altcoin season. A decrease in Bitcoin dominance may encourage investors to shift their focus to altcoins. Innovations in the crypto space can also spur interest in altcoins. Additionally, a strong overall economy and bullish stock market can increase risk appetite, driving investors towards the potentially high returns of altcoins. Signs that an altcoin season may be starting include a sustained Bitcoin bull run, rising market caps of major altcoins, and emerging trends in blockchain and Web3 that capture media and social attention.

Peter Brandt Suggests End to Bitcoin Bull Run

The crypto market might already be seeing one of the first signs of an altcoin season: the Bitcoin bull run is coming to an end. Peter Brandt, the veteran chart analyst and CEO of Factor LLC, believes Bitcoin has reached the peak in its price trajectory. Despite his earlier prediction in February, which forecasted a bullish cycle extending to September of 2025 with BTC possibly reaching $200,000, Brandt seems to have shifted his view based on the principle of exponential decay.

Exponential decay is a statistical concept that involves a quantity decreasing by a consistent percentage over time. Brandt pointed out that BTC has historically followed a roughly four-year bull/bear cycle, often aligned with its halving events, which reduce the mining reward by half. Each cycle has been much less potent than its predecessor, exhibiting an 80% reduction in the price multiple gained.

Bitcoin's Exponential Decay

Brandt believes that the historical pattern of exponential decay aligns with BTC’s recent peak of $73,835 in March 2024, suggesting that this could be the maximum for this cycle if the trend continues.

Despite this change in perspective, Brandt has not entirely given up on the potential for future growth. He acknowledged that BTC’s quadrennial mining reward halvings have historically spurred bullish trends. The latest halving in April reduced the mining reward from 6.5 BTC to 3.125 BTC, which could still ignite a bullish trend.

Brandt believes that if the previous patterns do in fact hold, the ongoing bull trend could reach between $140,000 and $160,000 by late summer or early fall of 2025. Nonetheless, he is still very cautious, keeping an eye on the exponential decay theory until evidence suggests it won’t impact the current bull cycle.

At press time, BTC was trading hands at $62,397.84 after its price dipped by 1.98% over the past day of trading.

XRP Faces Downward Trend

Unfortunately, not all altcoins are looking very healthy ahead of the predicted altcoin season. Ripple's XRP token has seen a large downturn in its value, recording a drop of 2.03% over the last 24 hours. The remittance token also saw its price drop by 4.74% and 19.11% over the past week and month, respectively. This downtrend coincides with the ongoing legal challenges involving Ripple and the U.S. Securities and Exchange Commission (SEC).

The legal conflict between Ripple and the SEC began in 2020 when the SEC accused Ripple and its executives, Brad Garlinghouse and Christian Larsen, of conducting an unregistered securities offering, raising over $1.3 billion. Ripple, however, won a crucial victory when Judge Analisa Torres ruled in its favor. Despite this win, the case has continued to evolve with further legal proceedings.

The XRP Army is closely watching the developments in the case as the SEC is expected to respond to Ripple’s Motion to Strike expert testimony. This motion challenges new expert materials submitted by the SEC in support of its motion for remedies and a final judgment.

Ripple's legal team has requested the court to dismiss these new submissions from the SEC, which allege that Ripple continued to violate U.S. securities laws even after the lawsuit was initiated. Ripple counters this by arguing that the SEC failed to provide timely disclosure of the expert witness’ identity and testimony during the discovery phase.

This ongoing legal battle continues to cast a shadow over Ripple's operations and the valuation of its XRP token, and it will very likely continue to do so until a final verdict is reached.