Ethereum, the second largest cryptocurrency by market capitalization, has seen a significant drop in fees, drawing attention on the crypto market.

In a recent tweet, IntoTheBlock stated that total ETH fees decreased in the quarter — marking their lowest level since 2020. According to data presented by IntoTheBlock, total ETH fees fell 59.6% to $208 million. During the first quarter, ETH’s price fell by 49%, wiping out more than $170 billion in market value. This was the third worst quarter for ETH since 2016.

IntoTheBlock identified two primary reasons for Ethereum's fee drop: an increase in the gas limit and a growing migration of activity to layer-2 (L2) solutions.

In February, Ethereum raised gas limits for the first time in 2021 after more than half of validators approved the change, which was implemented automatically without the need for a hard fork.  

Ethereum's transaction capacity was increased when validators decided to raise the gas limit to roughly 32 million units, with a maximum projected capacity of 36 million units.

The gas limit specifies the total amount of gas that can be used in a block. If transactions in a block surpass this limit, they are either held until the next block or compete for inclusion based on the gas price offered. The gas limit was last increased in 2021, from 15 million to 30 million gas units.

Pectra mainnet upgrade nears

Pectra, one of Ethereum's most significant enhancements since the shift to a proof-of-stake consensus mechanism in 2022, is now scheduled to hit the Ethereum mainnet on May 7. Pectra's finalized date was disclosed at a Thursday meeting for Ethereum devs.

Originally intended for a March 2025 release, Pectra was delayed owing to finality issues on the Holesky testnet but has been working smoothly on the Hoodi testnet, which was created in reaction to the testnet issues.  The upgrade also encountered a minor issue on the Sepolia testnet in early March, which was eventually identified and resolved.

Ethereum has not been spared from the recent market decline. The second-largest crypto asset by market capitalization is down 6.3% weekly and up 0.64% in the previous 24 hours, trading at $1,778 at press time.