Ethereum Fees Hit 7-Year Low as It Finally Outperforms Bitcoin – One Hidden Data Point Proves This Rally Is Sustainable

Ethereum just flipped the script. Network fees have cratered to levels not seen in seven years, while its price momentum has decisively overtaken Bitcoin's for the first time in what feels like forever. This isn't just a blip—buried in the on-chain data is one metric suggesting this move has serious legs.

The Fee Collapse: What It Really Means

Transaction costs on Ethereum have plummeted, making the network usable again for more than just whale-sized transfers. This isn't about temporary calm; it's a structural shift. Lower fees act like a gravitational pull, drawing in developers and users who were priced out during the frenzy. Activity begets activity, creating a virtuous cycle that's far more sustainable than speculation alone.

The Hidden Engine Driving Performance

Forget the surface-level price charts. The real story is in the utility. While Bitcoin holds its ground as digital gold, Ethereum's ecosystem is buzzing with applications that are actually being used. This fundamental demand—not just trading desk whims—is what's finally propelling ETH past BTC. It's the difference between a store of value and a productive asset, a nuance that traditional finance often misses while chasing the next ticker symbol.

Sustainable Momentum or Another Crypto Head Fake?

The data point that matters isn't the hype; it's the consistent, fee-efficient usage growing beneath it. This rally is being built on a foundation of real network utility, not just leveraged bets and influencer tweets. While skeptics wait for the other shoe to drop, the on-chain narrative is writing a different story—one where lower costs unlock higher potential. The era of 'ultra-sound money' might just be meeting the age of 'ultra-useful' infrastructure.

ETH’s spot-driven revaluation

The quality of this rally distinguishes it from the leverage-fueled breakouts seen earlier in 2025. Market structure data indicate this is a repricing of the asset, not a speculative squeeze.

According to CryptoQuant, funding rates across major derivatives exchanges remain subdued even as prices surge. This divergence is critical as earlier rallies this year often coincided with skyrocketing funding costs, a sign of exhaustion driven by over-eager longs.

However, the recent absence of “froth” suggests the bid is coming from spot buyers and institutional desks absorbing supply.

Indeed, this aligns with on-chain signals leading up to the meeting.

Santiment data reveals that large holders (known as whales and sharks) accumulated nearly 1 million ETH (valued at over $3.1 billion) in the three weeks leading up to this decision. These entities were positioning for a specific outcome: a Fed that prioritizes growth stability over aggressive disinflation.

Now that Powell has delivered that “put,” the $66.5 billion in stablecoin “dry powder” currently sitting on exchanges has the green light to be deployed.

In previous cycles, such a large overhang of idle capital often catalyzed sustained rotations once macro uncertainty cleared.

The revenue paradox

However, this bullish rotation forces institutional allocators to confront a glaring contradiction in Ethereum’s fundamentals: the collapse of Layer-1 revenue.

Following the Dencun upgrade, the economics of the Ethereum mainnet have shifted radically. While Layer-2 solutions like Coinbase-backed Base now process 94% of Ethereum network transactions, this activity no longer results in massive ETH fees.

According to Glassnode’s data, this has resulted in the blockchain network’s mainnet fees plummeting below 300 ETH per day on a 90-day moving average, the lowest level of revenue generation since 2017.

Strictly speaking, this weakens the “ultrasound money” narrative. Without high issuance fees to offset, ETH has flirted with becoming inflationary again.

Yet, the market’s response to the Fed cut suggests investors are looking past the yield-bearing “bond” narrative and valuing Ethereum as a growth-equity platform.

The bet is that the explosion in L2 activity, which makes the network cheaper and more usable for real-world tokenization and stablecoin usage, creates a stickier long-term moat than high gas fees ever did.

In a lower-rate environment, the market is willing to pay a premium for this ecosystem growth, even if the direct rent extraction has temporarily dipped.

This structural confidence is mirrored in corporate treasuries. Tom Lee’s BitMine Immersion Technologies, acting as a proxy for institutional demand, added roughly 138,452 ETH to its balance sheet last week.

With a total holding of 3.86 million ETH valued at $12 billion, this accumulation represents a mechanical removal of supply that complements the $177 million in daily inflows seen in spot Ethereum ETFs on Dec. 9.

The 2026 Projection

Meanwhile, the most significant takeaway from today’s meeting is not the cut itself, but the “dot plot” for 2026. The Fed has outlined a path of gradual easing, projecting rates to settle significantly lower over the next 18 months.

For crypto markets, the pace matters as much as the direction. A panic-induced slashing of rates WOULD imply a recession—a scenario where all risk assets, including crypto, typically sell off.

Conversely, the “gradual” path outlined today signals that the economy is resilient enough to handle a measured descent. This is the “Goldilocks” scenario for Ethereum.

As real yields compress, the discount rate on future technology growth falls. Ethereum, with its correlation to tech-beta and duration, historically outperforms in this specific environment.

The ETH/BTC ratio, which has ticked up to 0.036, is reacting to this shift in cost-of-capital expectations. The ratio remains historically low, but the break above its trendline suggests the “underperformance trade” may have run its course.

The verdict

Jerome Powell has effectively provided the market with a roadmap for 2026 that favors risk-taking in established technology protocols.

The Fed’s willingness to tolerate “somewhat elevated” inflation to secure a soft landing reduces the appeal of holding cash and incentivizes a MOVE further out on the risk curve.

Ethereum enters this post-FOMC window with a rare confluence of tailwinds: a spot-driven market structure, heavy institutional accumulation, and a macro environment that lowers the cost of capital for growth assets.

While the collapse in L1 revenue presents a long-term economic puzzle, the immediate market verdict is clear: the rotation has begun, and the “soft landing” trade is being expressed in ETH.