How Does a High Fee Market Impact the Profitability of Decentralized Finance (DeFi) Activities?

High transaction fees significantly reduce the profitability of DeFi activities, especially for smaller users. Tasks like swapping tokens, providing liquidity, or staking require multiple on-chain transactions, each incurring a fee.

If the fee exceeds the potential profit from the DeFi activity, it becomes uneconomical. This creates a barrier to entry, favoring large-volume traders who can absorb the high costs.