Gas Relief: Ethereum Fees Fall To July 2021 Lows
Ethereum gas prices have been dropping for a while. The aftermath of the Terra collapse has been riddled with various lows occurring due to the market crash it had triggered. One of these has been the decreased usage of decentralized finance (DeFi) networks as investors are still reeling from the crash. This has obviously translated to lower fees on the Ethereum network given the reduced network activity, sending it towards one-year lows.
Terra Collapse Affect Activity
Decentralized finance (DeFi) activity has since slowed significantly following the Terra crash. This is obvious in the total value locked (TVL) in the space which is now sitting at less than 50% of its peak. Ethereum which is the leading DeFi network has felt this decrease especially well. The blockchain had already started recording lower activity for the month of March, the Terra collapse triggered further decline.
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At first, activity and by extension, fees, had spiked when the Terra collapse had first been publicized. But it was obvious that this surge was a result of investors clamoring to move their funds out of the DeFi networks to ensure their safety. This had caused the fees on the Ethereum network to go up. However, not long after, this activity will die down, taking the gas fees with it. By the time investors were done, TVL on the Ethereum network had declined from 7.1 million ETH to 6.3 million ETH.
ETH fees drop to ten-month lows | Source: Arcane Research
Gas fees have now declined towards levels not seen since July of 2021 when gas was as low as 24 Gwei. This indicates that the heavy computational activity that had been required to carry out transactions on the network has declined considerably, making this an opportune time for users waiting for lower gas fees to take advantage of DeFi offerings.
Ethereum Starting To Pick Back Up
By now, it has now been almost a month since the Terra crash occurred. The market is still recovering from this but investors are moving on fast. This is evidenced in the decentralized finance (DeFi) activity on Ethereum picking up once more. This has resulted in a rise in transaction fees after bottoming out at a low of $3.6 on Sunday.
ETH price recovers above $1,900 | Source: ETHUSD on TradingView.com
With the increase in activity and gas fees has come an increase in the price of the digital asset. ETH’s decline in the month of May had seen its value revert to 10-month lows. However, the new week had brought with it good tidings that saw the price of the digital asset make a remarkable recovery above $2,000.
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The cryptocurrency remains a long way from its all-time high of $4,800. However, with recent trends pointing towards a bullish couple of weeks, a recovery back above $2,500 is not out of the cards. Likewise, the activity on the network is expected to continue to grow as more investors return to DeFi.
Featured image from Financial Times, charts from Arcane Research and TradingView.com
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