Ethereum fees rose to record highs amid the recent crypto downturn. Users paid more than 2,000 gwei to carry out transactions at their peak.
Digital asset research firm, Delphi Digital, written down Gas prices hovered between 1,500 and 1,700 Gwei for about an hour as DeFi liquidations sparked “gas wars between liquidators and arbitrageurs”.
May 19th Daily Gwei Newsletter, Ethereum developer Anthony Sassano speculated that the fee frenzy was likely triggered by on-chain margin traders running to get out of their leverage positions:
“The price was falling so quickly that people were scared of their leveraged positions in the chain and were willing to pay anything to move their transaction into the next Ethereum block (presumably to close their positions).”
Chris Weston of Melbourne-based broker Pepperstone also highlighted the role of leverage in the crash, estimating that cascading margin calls drove $ 9.13 billion worth of liquidations across crypto exchanges within 24 hours.
Alameda Research’s Sam Trabucco also noted high leverage in the Ethereum markets, criticizing the narrative that the Ethereum rally was largely driven by institutional spot buying.
“I’ve seen a lot of speculation that the rallies (especially the ETH rallies) were low leverage and point driven and therefore kind of more organic […] That narrative was super wrong, ”said Trabucco.
That people thought that ETH in particular was just an institution buying on Coinbase or something was particularly confusing for me. Check out these HUGE OIs / rewards as ETH skyrocketed to their ATH! This was all on leverage, just waiting for a day like today to come … pic.twitter.com/v4tpVd7teU
– Sam Trabucco (@AlamedaTrabucco) May 20, 2021
Crypto lights weren’t exempt from the gas crisis. CoinShares CSO, Meltem Demirors, tweeted about her stalled transactions despite more than paying $ 1,000 in gas charges.
The market hits me in the face and reminds me again that blockchain computing is a finite resource
– Meltem Demir (rs (@Melt_Dem) May 19, 2021
However, some analysts have found a silver lining in the midst of skyrocketing fees with Paradigms Hasu estimate that Ethereum stakers would have made fee income of “ten to one hundred million dollars” if EIP-1559 and Proof-of-Stake had been live during the crash.