Ethereum Gas Prices Hit All-Time-Low as 110,000 ETH Pours Into DeFi

• Binance Ethereum staking netted 100,000 ETH on Aug. 12
• ETH whale transactions worth over $100,000 or more have halved since Aug. 12, 2024.
• Ethereum’s supply has increased by over 197,000 ETH (+$500 million) since March 2024.

Ethereum gas fees have hit an all-time low as ETH continues to trade below $3,000 amid a broad period of market uncertainty. Though the reduced costs are good for users, they may not be good for investors.

Ethereum staking protocols are also beginning to show signs of life following weeks of neutral and muted inflows as over 100,000 ETH is poured into decentralized finance (DeFi) staking platforms.

Ethereum Gas

As per research from CryptoQuant , Ethereum gas prices plummeted to an all-time low of 2.9 Gwei, and have dropped even further since.

The news comes months after the Dencun update went live. One of the major selling points of the update was the additional resources that Layer-2 networks could save, which in turn greatly reduced transaction costs.

“Ethereum’s daily mean fees, denominated in USD, also hit a new multi-year low of just $0.85. As a result, Ethereum’s daily mean burn rate fell to its lowest level ever, with only 115 ETH burned yesterday.”

The research attributed a great deal of this reduction to the Dencun update. That said, the researcher also noted that despite Dencun and Ethereum ETFs, ETH has failed to make any meaningful gains. In fact, it’s down around 35% since March 2024 whilst the supply of ETH has increased by over 197,000 ETH.

Liquid Staking Up

The news follows a rather significant week for Ethereum’s liquid staking protocols, which saw around 110,000 ETH in net inflows for the week ending Aug. 18, 2024.

As per data from DeFi Llama , Binance hoovered up the vast majority of these inflows, bagging 100.01k ETH tokens into its staking protocol. That’s roughly $258 million at today’s prices. Most impressively, the funds were staked on Aug 12, 2024.

At the beginning of the year, liquid staking derivatives (LSDs) performed particularly well. During this period, they added tens to hundreds of thousands of ETH to their pools weekly. However, between late March and the end of May, users were unstaking at feverish rates. Almost 500,000 ETH was pulled out through the final week of March.

Notably, much of this activity occurred in the weeks before and after Ethereum’s Dencun update, which failed to cause any significant market uptick for ETH as many had hoped. Staking activity saw net inflows amid news that the U.S. was preparing to launch spot Ethereum exchange-traded funds (ETFs). Once they finally launched on July 23, 2024, LSD numbers began to look positive again.

Interestingly, there have been a few instances where around or over 100k ETH tokens have been sent to the Binance staking platform in a single day. This activity began on Sep. 2023 and has happened several other times since.

Negative Outcomes

The news from CryptoQuant also observes that declining network fees may result in long-term issues like “user and liquidity fragmentation”. While low fees are beneficial for users, it’s not great for investors.

Thanks to Dencun providing Layer-2 with the means of severely reducing transaction fees, this type of fragmentation could be a serious issue. This is considered a “DeFi killing” problem where assets and trading volumes are spread too thin across multiple Layer-2 networks.

Ironically, this would work against Dencun’s intended outcome of reducing friction and costs on the Ethereum network. Fragmented liquidity across Ethereum simply results in higher trading costs, slower speeds, trading friction, and other negative outcomes.

As per Santiment, ETH whale transactions  have also seen a major in recent months. Between Aug. 12 and Aug. 19, transactions containing $100,000 worth of ETH or more have halved from 5,371 to 2,138.

About the Author

Eddie Mitchell

Eddie has been writing news and content primarily for crypto news and industry players over the past seven years. With an eye for the bigger picture, Eddie prefers to investigate the broader implications of a story, as well as explore the weird and wonderful world of crypto. He believes blockchain has already changed the world, but observes the space overall with a skeptical and adoring eye.

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