Is the market mispricing Ethereum? What ETH’s fee compression tells us
Currently, many L1s have been strategizing round price discount, but it surely comes at a value.
The logic is straightforward: transaction charges are a core a part of an L1’s income engine. Each community improve requires income to scale the chain and preserve the capability wanted to help rising demand. Ethereum’s [ETH] Glamsterdam improve falls proper into this development, and the consequences are already displaying up on-chain.
In accordance with Token Terminal, transaction charges on Ethereum L1 have dropped to document lows. Whereas cheaper transactions enhance accessibility, constantly decrease charges can put stress on Ethereum’s long-term scaling economics. That affect turns into even clearer when wanting on the community’s income knowledge.
Knowledge from DeFiLlama reveals Ethereum’s income trending decrease on a QoQ foundation.
Because the chart above highlights, community income has been declining steadily since peaking at $366.63 million in Q3 2025. By Q1 2026, Ethereum closed with $260 million in income. In easy phrases, the Glamsterdam improve, which lower community charges by 78%, is now clearly reshaping Ethereum’s income construction on-chain.
That naturally shifts the main focus towards Ethereum’s broader community development. On the macro aspect, volatility is already weighing on ETH’s value construction. However now, with Ethereum’s scalability economics additionally going through stress, the larger debate is changing into tougher to disregard: Is ETH genuinely undervalued right here?
Ethereum’s income compression is colliding with sturdy demand
Undervaluation occurs when the market fails to completely value in a community’s underlying energy.
On the floor, Ethereum’s falling charges and declining income make ETH’s current weak point look justified. Technically, ETH is down round 6.2% in Could and continues to underperform Bitcoin [BTC] throughout most main timeframes. In that context, decrease charges can simply be interpreted as an indication of weaker on-chain demand.
However the on-chain knowledge is beginning to inform a unique story. Because the chart under reveals, Ethereum’s month-to-month transaction rely has climbed to a brand new all-time excessive, nearing 80 million transactions. Put merely, community exercise stays sturdy whilst charges and income proceed trending decrease.
In that setup, ETH’s present technical construction begins wanting more and more mispriced.
From a community standpoint, decrease charges should not translating into weaker utilization. If something, price compression is pulling extra customers on-chain by making Ethereum cheaper to make use of. That dynamic is changing into a powerful reflection of Ethereum’s underlying community fundamentals.
In opposition to that backdrop, the decline in income seems extra like a byproduct of Ethereum’s evolving price mannequin quite than an indication of fading demand. In that setup, ETH’s present technical positioning seems more and more undervalued relative to the community’s underlying on-chain energy.
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