Ryan Sean Adams, Ethereum and DeFi proponent, has highlighted how the high gas-free in relation to the current Ether price can actually be a bullish sign.
The expert commented that Ethereum is “actually getting cheaper” if we look at it from a price-to-sale ratio aspect.
The price-to-sales ratio (P/S) is calculated by taking the market capitalization of a company and dividing it by revenue received from sales. In Ethereum’s case, if the $184 billion market cap is divided by the total revenue that is derived from transaction fees, we will notice a similar metric. If the P/S ratio is low, the investment looks more attractive.
Some are debating that this can’t be applied to decentralized digital assets.
Still, at the beginning of 2021, Ethereum’s P/S radio hit the lowest level in three years, being somewhere close to 0.02.
Grayscale commented:
Because of the high effort that goes into reducing ETH fees with ETH2, layer-two scaling, and the Ethereum Improvement Proposal EIP-1559, the revenue can’t really be considered a guarantee in the future.
Nevertheless, when the transactional fees are high, it means that the demand on the network is also high. This is, of course, great news for both miners and hodlers.
Currently, the average fee for an Ethereum transaction has reached a new ATH of close to $23. This results in the impossibility of smaller transactions taking place, thus eliminating plenty of DeFi activity for the average person.
However, both Ethereum advocates and Grayscale look at the bright side:
Grayscale also thinks that the gas-lowering EIP-1559 could actually lead to a positive feedback loop, which is highly bullish for the price of ETH.