The decentralized finance (DeFi) trend exploded this year as an unprecedented Uniswap token swapping boom took the crypto market by storm.
The short-lived DeFi season saw millions, and eventually billions, flow into the sector developed on Ethereum’s smart contracts. ERC20 tokens built on ETH powered apps that simulate traditional banking capabilities, such as lending and borrowing.
ETH, the world’s second-largest cryptocurrency, saw explosive growth as the total value locked (TVL) in DeFi protocols such as Yearn.Finance registered parabolic growth.
Since token swapping on decentralized exchanges requires Ether to pay gas fees, Ethereum’s price surged significantly. ETH has gained over 350% since the start of this year, outpacing even the ultra-bullish Bitcoin that has also rallied over 138% on the year.
Unfortunately, collapsing food tokens such as Yam and SushiSwap plagued with accusations of outright rag pulls began tarnishing the budding DeFi trend. As investors pulled funds away from DeFi and TVL dropped, the boom finally ran out of steam.
Is Another Phase of DeFi Dominance Imminent?
Transaction fees on ETH have started to pick up once again after a period of inactivity, hinting at the possibility that another wave of interest in DeFi is brewing.
Ethereum transaction fees experienced a period of stagnancy as DeFi tokens tanked, and investor interest turned to BTC. The king coin then kick-started a multi-week rally that has seen it hit $19,457 yesterday, which was just a hair from breaking the all-time high price.
During Bitcoin’s steady rise, DeFi users stopped moving around tokens between wallets or DeFi apps. However, the tide could finally be turning.
Earlier today, crypto bulls cashed in on Bitcoin’s rally toward its all-time high prices, leading to an intense sell-off that has seen the coin crash by over $2,000.
This profit-taking trend will likely see investors look for cheaper altcoins to put BTC profits into, leading to an explosion in altcoin and DeFi markets.
What Do Surging Ethereum Gas Fees Mean?
According to crypto analyst Goomba, Ethereum transaction fees have been picking up since mid-November. Sharing the chart below, he tweeted:
“$ETH transaction fees on the rise since mid-November was that to fill the $ETH 2.0 genesis contract or are going for another Uniswap/DeFi season?”
ETH gas fees are starting rising again | Source Etherscan.io
It is likely that the uptick in gas fees was triggered by increased transactions as more ETH moved in preparation for the Beacon Chain genesis at the start of December.
Another possible theory is that DeFi has started building again, and another DeFi season could be just around the corner.
