Ethereum Gas Prices Continue To Soar Due To Stablecoin Transactions• May 13, 2022 6:20 pm • Comments
According to the data, it is reported that gas prices on the Ethereum network has nearly quadrupled over the past few days due to stable coin transactions.
This data is acquired by the blockchain explorer Etherscan where the transactions were mostly involving two stable coins which were Tether (USDT) and USDC.
These stable coins had accounted for the majority of the transaction volume and the increased volume was recorded during a time when the crypto markets have been largely bearish.
As a result of the increased volume, it seems that the Ethereum network has been able to keep their gas prices low and this has once again reminded investors that the high costs could be a huge deterrent for future growth of the network.
Every time I see anything about gas being high I automatically think about ethereum gas fees. Never about the actual gas prices in real life 😂😂. PTSD https://t.co/oJUkA1KTN6
— EJ 🇭🇹 (@Elder301) May 13, 2022
Gas, measured in “gwei,” quantifies the computational power required to make a transaction on the Ethereum network. (The user making the transaction pays in ETH.)
At its most basic, the higher the gas, the more expensive the transaction. And things get more expensive as the network is congested.
While the declining value of ETH—now under $2,000 for the first time since July 2021—typically brings transaction fees down in dollar terms, the amount of activity on the network is actually causing the price of gas in USD to travel upward.
At one point on Thursday, the estimated cost of a Tether (USDT) transfer was more than $20.
And a lot of USDT is being transferred at the moment.
It was recorded that around $22 billion of USDT was moved which was the highest that it had been for awhile.
Investors are speculating that there may be fear of the Tether stable coin possibly depegging from the dollar as well following the collapse of another stable coin UST.
Tether had also briefly lost its peg and many in the past have questioned whether Tether actually has the assets to backup the dollar value of each USDT.
Tether claims to have the assets to back each stable coin which is different from UST’s approach which was backstopped through a list of collateralized assets like BTC, and LUNA.
People confusing $USDT and $UST and panicking.
People don't understand the difference between an under collaterized algorithmic stablecoin and a backed stablecoin.
Panic dumping $USDT for $USDC and plain old $USD.
Peak fud time.
Warning: this post will attract "Tether truthers"
— WhalePanda (@WhalePanda) May 12, 2022
Today, however, was a chance for the company to boast about its stablecoin’s, well, stability.
It published a blog post claiming it has processed 300 million redemptions of USDT and would be processing another 2 billion before the day is through.
USDC, meanwhile, which has publicized its move toward a reserve comprising only cash and short-term Treasuries, has benefited from the stablecoin panic.
Its market cap is up 0.75% as traders exit open positions on Ethereum exchanges and trade into USDC.
As the crypto market is currently going through a slump due to recent events, US regulators are using this as an opportunity to enforce more regulation upon the industry.
— remer.eth (@remer_eth) May 13, 2022
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