- Ethereum’s average gas fee plummeted almost 70% within a month, potentially indicating a bullish scenario for the cryptocurrency.
- Different asset classes, including ICOs, DeFi, NFTs, and stablecoins, have contributed to Ethereum gas prices over different periods, shaping the utility and demand dynamics on the Ethereum blockchain.
As May 2023 concluded, Ethereum, the second largest cryptocurrency globally, exhibited a fairly stagnant performance, currently hovering around $1,850. Yet, the past month brought about significant shifts concerning the transaction gas fee.
According to Santiment, an on-chain data analyst platform, Ethereum’s transaction gas fee dipped almost 70% within a month. Intriguingly, the gas fee peaked at $14 in early May, its highest for 2023, only to plunge below $5 by month-end. This substantial decrease could stimulate Ethereum’s utility, possibly providing a tailwind for ETH’s price.
Ethereum’s gas fee fluctuations have been largely influenced by various asset classes hosted on its blockchain. Each of these classes has sparked gas price surges at distinct intervals.
During 2017-2018, Initial Coin Offerings (ICOs) were in their prime, accounting for 40% of Ethereum’s gas due to ERC-20 token transfers. However, as the demand for ERC-20 tokens started to wane in subsequent years, decentralized finance (DeFi) emerged in 2020. Between June 2020 and 2021, the DeFi sector contributed 30% to the gas fee.
Nevertheless, Glassnode, another on-chain crypto analyst platform, underscores the consistent underperformance of DeFi tokens over the last couple of years, indicating a complex investment landscape.
Following this, non-fungible tokens (NFTs) gained significant traction from mid-2021, but demand dwindled by the end of 2022. On the other hand, USD-pegged stablecoins have seen increased user demand since 2020. Glassnode suggests a shift in utility rather than a decrease in demand, with stablecoins being used less for payments and more for hedging and as a store of value.
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These dynamics suggest a multifaceted picture of Ethereum’s blockchain utility, directly impacting the gas fees.