Ethereum Gas Fees Drop as Daily DEX and DeFi Volumes Decline
Ethereum gas fees have declined after their recent highs alongside a decline in DeFi transaction volumes but surprisingly, the rise in popularity of NFTs could push transaction costs back to new highs.
The rising popularity in decentralized finance (DeFi) is bringing fresh attention and optimism to the cryptocurrency market with the total value locked on all protocols increasing in price from $1 billion to $59 billion in less than just a year and the top 5 mainstream platforms accounting for $24.33 billion in total value.
Rise in gas fees have been one of the most noticeable consequences of the increasing interaction with DeFi protocols and currently, the Ethereum (ETH) network hosts most of the top DeFi projects. Gas fees have been continuously rising since November 2020 and reached a peak on Feb. 23 when the average transaction cost reached 373 Gwei. (approximately $11.72 at the current Ether price)
From Feb. 23, fees have declined by 65% with the average cost dropping to 131 Gwei on March 3 and data shows that certain times of the day offer fees below 70 Gwei.
DeFi transactions decreased as the market corrected
A possible subject for the declining gas fees seen over recent days can be found by analysing the daily decentralized exchange volume.
Reports from Dune Analytics shows that trading volume on DEXs (Decentralized Exchanges) has been on the decline since Feb. 23 peaking at $4.35 billion and the DEX daily 24-hour growth metric was down by 50% on March 3.
A data scientist at Flipside Crypto, Connor Higgins speaks, “fees have decreased over the past few days, but rather than attributing it to one specific cause.” Further he added that the high fees seen on Feb. 23 were an outlier when compared to the overall average on a longer time span.
Higgins said:
On average fees did fall, but it looks more like they are normalizing after a day of unusually high fees
Rising in NFT transactions
Users on the Ethereum network might have expected to see a more meaningful decline in gas fees as DeFi transactions are decreased but this has not been the case. One reason behind the rates remaining high could be the recent increase in activity from the Non-Fungible Token (NFT) sector.
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