Ethereum Gas Price Soaring As Stable Coins Panic Prevails

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Evening

So Ethereum gas fees are on rise again, as suggested by data from blockchain explorer Etherscan. Ethereum gas fees is measured in gwei, which refers to computation power miners have to vest to process transactions on network. And as network gets congested more gas is required to get miners to approve the transaction.

Plus Ethereum price also directly correlates to the gas fees. Increased Ethereum cost means the more costlier gwei gets(one billion gwei per ether) and hence increased transaction cost.

Data from Etherscan suggests, average Ethereum gas price surged from 61gwei on May 10 to 147 gwei on May 11. And whereas Ethereum price is on a decline curtesy of the recent bulls run, Ethereum gas price in dollar has still increased. Increase in gas cost is due to the increased activity on the network, causing network congestion.

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When we usually talk about network congestion on Ethereum NFT market places like OpenSea are the main culprit, contributing majorly to gas fees hike. But this time its not the NFT marketplace, but instead transactions of centralized stable coins USDT and USDC are the cause.

A lot of USDT have been moved around the network as users get more keen to find shelter under stable coin umbrella during the ongoing bloodbath. About 22 Billion USDT was moved around on Ethereum network this Tuesday, the highest amount since May last year.

But too much USDT movement doesn't necessarily means that demand of USDT is on the rise, as USDT yesterday briefly lost the peg down to $0.98. USDT market cap has actually declined by 2% indicating reduced circulating supply.

One reason for USDT under stress might be the people thinking of UST and USDT the same, whereas two are totally different by design. UST downfall has stirred the faith of many in stable coins and some may be viewing USDT with same glasses as they see UST.

On the other hand anther major centralized stable coin, USDC has capitalized on market panic surrounding stable coins. USDC announced that it will move towards reserves backing the coin in the form of cash and short term treasuries. USDC market cap has already risen by 0.75% so far.

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