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Blog

Date:
27th Nov 2020
Author:
CryptoAltum Research Team

Ethereum Gas Fee Rise as DeFi Melts


The Ethereum network fee, or Gas, rose to over $2 on Nov 26 according to BitInfoCharts. Strangely, the average transaction fees were rising as ETH prices plunged from above $600. Meanwhile, the total value locked in DeFi continues to fall, dropping from over $14 billion on Nov 22 towards $12 billion on Nov 27.


Details: 

Ethereum Gas fee is a metric that points to network activity and possibly, the state of price action. These three parameters are directly proportional. However, on Nov 26, the average transaction fee slightly rose as ETH prices plunged. Analysts pointed to falling TVL in DeFi and the likelihood of yield farmers re-adjusting their crypto portfolio, or protocols liquidating collaterals, causing the network’s activity to rise, subsequently forcing Gas fees higher.


Impact on ETH Price: 

Neutral. Overly, traders are confident in Ethereum’s prospects. Vitalik Buterin has said the launch of Eth2 will be the beginning of the end of high network fees. Besides, there are present solutions through layer-2 that seek to address high transaction fees through off-chain transactions batching and periodic confirmation on the mainnet to avoid network congestion.


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