Sluggish Speed on Ethereum Network leads to falling prices; Examining Potential Future Scenarios for ETH.
Here Comes the Trouble for Ethereum:
Boom to Bust: A Rough Ride for Ethereum
Lately, there's been some turbulence in the Ethereum skies. The once popular go-to blockchain has been experiencing a noticeable decline in user activity, leading to a slump in its network's burn rate. This change has raised quite a few eyebrows and caused a ripple effect in the crypto world.
With the burn rate taking a dive, the Ethereum Network's mechanisms to decrease the supply of ETH have weakened. As a result, the circulation supply of ETH has swelled, stirring up inflationary pressure on the token. This has proven to be a tough challenge for Ethereum to maintain a stable price above the $2,000 mark.
More Coins in Circulation Meaning More Trouble
According to Ultrasoundmoney, within the past month alone, 72,927 ETH, valued at $134 million at current market prices, has been added to ETH's circulating supply. This issues brings the total supply to 120,730,199 ETH, a number that significantly surpasses pre-merge levels.
This escalation in ETH's supply is primarily driven by a decrease in user activity on the Ethereum Network, which in consequence reduces its burn rate. Ethereum's burn mechanism, introduced through EIP-1559, sends a portion of transaction fees into the ethery void, reducing the circulating supply of ETH. But this mechanism is directly linked to network usage.
When transactions abate like this, less ETH is burned, triggering a surge in its supply. As a matter of fact, the daily amount of ETH burnt has dropped by an astonishing 95% year-to-date. In April 2025, the network hit an all-time low, burning its least amount of coins in a single day ever.
So, Why Are Ethereum Users Bailing Out?
A number of factors are causing Ethereum users to ditch the blockchain in favor of greener pastures. Many are migrating to Layer-2 (L2) solutions like Optimism and Arbitrum, which offer significantly reduced transaction fees and faster execution times.
For instance, as of April 30, the average transaction fee on Optimism's mainnet was a mere $0.024. By contrast, completing a transaction directly on Ethereum costs an average of $0.18 on the same day—over seven times more expensive.
Also contributing to the exodus of Ethereum users is the upsurge of "Ethereum killers" like Solana, which have gained considerable traction in recent months. This Brave New World of crypto has drawn in users seeking lower fees and speedy transactions, further depleting Ethereum's transaction count.
What Do Experts Have to Say About Ethereum's Fundamentals?
The drop in Ethereum's user demand and the subsequent rise in ETH's supply has sparked concerns about the strength of its fundamentals. Vincent Liu, Chief Investment Officer at Kronos Research, addressed this issue, stating:
"Ethereum's fundamentals remain strong relative to other Layer-1s, particularly when you consider its total value locked (TVL) of $368.921 billion, which positions it at the top of the leaderboard."
Even though Liu pointed out that Ethereum ranks fifth in 24-hour fees, he highlighted that the network still "demonstrates significant demand and usage."
On a similar note, Temujin Louie, CEO of Wanchain, noted:
"Compared to other Layer-1s, fundamentals remain Ethereum's strength... Ethereum's post-merge architecture makes it potentially deflationary, which is a structural advantage over most competing Layer-1s."
What Does the Future Hold for Ethereum?
Even with a strong fundamental foundation, declining activity on Ethereum poses a threat to ETH, particularly in the shorter-term. Lower network activity generally signals waning demand for ETH, and increased coin issuance undermines Ethereum's deflationary framework, which was constructed to support price appreciation.
Ethereum currently trades at $1,834, having suffered a minor dip of 1% over the past day. The coin's spot markets continue to exhibit bullish signs, as reflected in its climbing Relative Strength Index (RSI), which is currently at 57.68. This zest indicates that ETH has room to break above the $2,027 mark if buying pressure intensifies.
However, if buying pressure ebbs, ETH's value could plummet to $1,733. So, buckle up, dear crypto enthusiasts—the Ethereum rollercoaster isn't over yet!
Sources:[1] CoinMetrics[2] Glassnode[3] Messari[4] Dune Analytics[5] Kevin Beardsley (rant), Cointelegraph
Disclaimer:In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
- The decline in user activity on the Ethereum Network has resulted in a slump in its network's burn rate, stirring up concerns about the token's stability.
- This surge in Ethereum's supply is primarily driven by a decrease in user activity, which in consequence reduces its burn rate.
- As a result of the drop in user demand, approximately 72,927 ETH, valued at $134 million, has been added to ETH's circulating supply in the past month.
- The burn mechanism, introduced through EIP-1559, is directly linked to network usage, and when transactions abate, less ETH is burned, triggering a surge in its supply.
- Many Ethereum users are migrating to Layer-2 (L2) solutions like Optimism and Arbitrum, seeking significantly reduced transaction fees and faster execution times.
- In April 2025, the network hit an all-time low, burning its least amount of coins in a single day ever, as a result of the decline in user activity.
- Vincent Liu, Chief Investment Officer at Kronos Research, emphasized Ethereum's total value locked (TVL) of $368.921 billion, positioning it at the top of the leaderboard among Layer-1s.
- Despite Ethereum ranking fifth in 24-hour fees, it still demonstrates significant demand and usage, according to Vincent Liu.
- Comparing the fundamentals of Ethereum to other Layer-1s, Temujin Louie, CEO of Wanchain, noted that Ethereum's post-merge architecture makes it potentially deflationary, offering a structural advantage.
- Current trading at $1,834, Ethereum's value could plummet to $1,733 if buying pressure ebbs, while it has room to break above the $2,027 mark if buying pressure intensifies, indicating that the Ethereum rollercoaster isn't over yet.
