Gas fees on Ethereum, the root blockchain of Circle’s stablecoin USD Coin (USDC), are hitting the roof again as users scramble to offload their holdings due to the storm raging over USDC’s stability.
Ethereum Gas Fees Soared to Over $60
As of March 10th, the median gas fee on Ethereum was around 23 Gwei. However, following the USDC news, the gas price jumped to 304 Gwei in minutes leading up to press time, accounting for over a 1,200% increase, according to data by Nansen.
Transactions on Uniswap currently cost around $58.28 by average fee and over $22 on the OpenSea marketplace, per Etherscan. Earlier, gas fees were seen at levels higher than $70-80, especially on Uniswap.
Why is Gas Fee Pumping?
One plausible factor contributing to the sudden pump in Ethereum gas price is the exodus of investors from USDC, the second-largest stablecoin. Following the closure of Silicon Valley Bank on Friday, one of a number of Circle’s banking partners, users have been rushing to exit the token en masse, fearing its stability is at risk. Since Friday, decentralised exchanges like Uniswap, 1inch, including Curve Finance have recorded high activity on USDC swaps. According to Nansen data, users were mostly trading USDC for Ether (ETH) and Tether (USDT), the largest stablecoin.
Centralised exchanges are not left out. Significant platforms, including Coinbase, Crypto.com, and Binance, have announced the suspension of USDC conversion. Binance said the reason is “due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion.”
Over $2 Billion in USDC Has Been Withdrawn From Circle
In addition to the swaps, about $2.7 billion in USDC has also been redeemed in the last 24 hours, pointing to a growing level of market anxiety on USDC at the moment. The strain on USDC’s stability is also becoming evident, with the price now down to $0.92, with a market cap of $37.57 billion.
