Ethereum's Burn Rate Hits All-Time Low, ETH Supply Growth at 0.76%
1min read The Ethereum ecosystem is currently experiencing a significant downturn, with the burn rate of ETH reaching an all-time low. This decline indicates a reduced demand for transaction processing on the network. The implementation of Ethereum’s EIP-1559, which mandates the burning of ETH used for base transaction fees, has not been able to counteract the current trend of decreased network activity. The recent burn rate of just 53.07 ETH, approximately $106,000, marks a significant reduction in the network’s economic activity. This low figure is unprecedented since the implementation of EIP-1559, which was designed to enhance transaction fee efficiency and address inflationary pressures through the burning of ETH.
The current 0.76% annual growth forecast in ETH supply, considering recent burn rates, raises questions about the asset’s potential deflationary nature during peak activities. Analysts have noted that the recent burn rate starkly illustrates the diminishing demand for Ethereum’s blockspace. This trend is further supported by a decline in the seven-day moving average of active addresses, which has fallen to its lowest point since October 2024. This decline is not isolated; it is echoed by a significant downturn in new address creations and total transaction counts. These metrics suggest that the Ethereum network is experiencing a phase of stagnation, raising concerns among market participants and potential investors.
In response to these developments, Standard Chartered has sharply revised its price target for ETH in 2025 from $10,000 to just $4,000. This drastic adjustment reflects the evolving landscape of Ethereum, particularly the rise of Layer 2 solutions that are increasingly extracting value from the ecosystem. Geoffrey Kendrick, the bank’s global head of digital assets research, pointed out that Layer 2 solutions, and Base in particular, now extract super-profits from the Ethereum ecosystem. This underscores the competitive pressures the primary network now faces.
As Ethereum navigates these challenges, it becomes crucial for stakeholders to assess the implications of a slowing network and the rise of competing platforms. Without strategic innovations or enhancements to address user demand, Ethereum risks losing its position in the market. Maintaining user engagement and leveraging Layer 2 technologies will be imperative for the network’s longevity and growth. Investors and users alike should remain vigilant and informed as these developments unfold.
