Should we celebrate the decrease of Ethereum gas fees as the currency’s price continues to rise? First, let’s break down the metrics driving this trend.
Ethereum’s fast gees have been dropping in the last seven days as the currency records a new all-time high level. Two days ago, on November 8, Ethereum went over $4800 for the first time ever. As of press time, the price is hovering at around $4679.18.
In effect, the average gas fees hit a low of $37.19, marking a 33.55% reduction from last Tuesday, when the average transaction fee was $56.
Another figure we need to look at is the network’s hash rate which has been marching to new heights starting last week. Last Monday, Ethereum’s hash rate hit 812,769 GH/s. As of today, that figure has peaked at a new high of 843,908.6252 GH/s, according to Etherescan.
Explaining the Decrease in Ethereum Gas Fees
Now that we have laid down the figures let’s explore how they interact and relate with each other. Although the hash rate has increased, lower transaction fees could indicate lessening demand. Furthermore, while the price and computing power of Ethereum might be sky-high right now, another metric has dropped off considerably: trading volume.
The NFT volume in the Ethereum blockchain is cooling down. Last week, it only recorded $21 Billion worth of trades. Then, by Saturday, that figure dropped off significantly: Ethereum had about $14 billion trading volume. Within that period, Ethereum also lost $10 billion from its market capitalization, which currently stands at around $557 billion according to CoinMarketCap.
Even leading NFT Marketplaces are mirroring this decline. Leading peer-to-peer marketplace OpenSea is a primary example of the gradual decline in monthly trading volume. trading volume on the platform dropped from $3.4 billion in August to $3 billion in September, per data from Dune Analytics. Then, it dipped down to nearly $2.64 billion in October—a 12% month-over-month decline each step of the way.
In parallel, leading NFT Collectibles has not been spared from the blow. OG Collectible CryptoPunk is down from $679 million in trading volume in August to nearly $218 million in September. Last October, it declined further to $157 million last month according to Cryptoslam.
Should We Be Concerned?
There’s a unanimous sentiment that despite figures being down, the NFT craze is far from over. Other projects saw increased volume from September to October. Also, new NFT projects are launching all the time.
For example, play-to-earn giant Axie Infinity launched its own Decentralized exchange: Katana. It went live last week and the resulting pump in its in-game currency and governance token, SLP and AXS, was quite substantial. Katana was heavily inspired by leading DEX SushiSwap and its Sushi farming strategy.
Artwork marketplace SuperRare posted its best month ever with about $37 million in Ethereum volume, up from about $24.5 million in September. Fellow artwork platform Foundation also recorded its best month yet with over $18.5 million in volume in October, up from $16.8 million in September.
Plus, Ethreum is on track to roll out a major network upgrade. Ethereum 2.0 promises significantly higher speeds, lower gas fees and a much greener carbon footprint.