Ethereum recently recorded a significant decline in network activity, characterized by a sluggish amount of burning ETH and chain-chain indicators.
What happened to Ethereum?
Shocking metrics in the Ethereum ecosystem
Ethereum is going through a worrying phase, with transaction fees reaching an all-time low, and the amount of ETH burning reflects a significant drop in on-chain activity. Based on the size of the block, there is only 53.07 ETH, only 53.07 ETH, about $106,000, burning at the current market price, the lowest figure on March 23. This is the lowest number since the implementation of the EIP-1559 machine.
Source: Block
Ethereum previously stood out with the ETH burning mechanism introduced by EIP-1559, which helps control inflation and can even present inflation assets with ETH during high network activity. At high demand, the amount of ETH burns can exceed the amount emitted, reducing supply and increasing price pressure. However, the current situation is the opposite. As demand for the Ethereum network decreases, the amount of ETH burning will also decrease, causing the ETH supply to return to inflationary state.
At the current 7-day burn rate, ETH supply will increase by 0.76% per year, rather than dropping as before. This could undermine the long-term economic model targeted by Ethereum. Additionally, due to the extremely low traffic flow in the ecosystem, Ethereum’s gas fee is only 0.879 GWEI per transaction.
Source: Ultrasonic Funding
Recording low combustion records is not the only negative indicator. Additionally, several indicators show sluggish activity in the ecosystem:
- Since October 2024, the 7-day moving average of active wallets has dropped to its lowest level, clearly reflecting users’ interest in the network.
- The number of new addresses has also been greatly reduced, indicating that fewer participants joining the Ethereum ecosystem than before.
- The number of transactions and daily transaction volumes have been decreasing in recent weeks.
- Ethereum’s 24-hour revenue also fell to $100,000.
Source: Block
What is the root cause?
The rise of Tier 2 solutions such as arbitration, optimism and foundation is shifting users and liquidity from Tier 1 of Ethereum.
This shift means the Ethereum ecosystem is growing, but Layer 2 is capturing most of its revenue, as Geoffrey Kendrick of the Standard Charter notes. As a result, Ethereum’s price outlook weakened, with its 2025 target cut from $10,000 to $4,000.
Previously, high-level fees maintained ETH scarcity, but with revenue spread across 2 tiers, Ethereum’s long-term price growth is at risk. If this trend continues, Ethereum may lose its deflationary state.
Eth suddenly reached its peak today
Despite all the bad news surrounding the Ethereum ecosystem over the past month, ETH remains eth On March 24, an impressive surge, briefly reaching nearly $2.1k.
Source: Coingecko
It seems that the Ethereum community and its supporters have not lost hope and are still expecting a potential price rebound in the near future. Many are looking for key economic events, including decisions from the Federal Reserve and FOMC, which could impact ETH’s next move.
Learn more: Ethereum price forecast: ETH technology analysis
