Ethereum burn rates have taken a toll very fast and this has left many wondering if it is any closer to being deflationary. Let us find out the details below.
Why Is Ethereum Burn Rate Dropping?
The more a cryptocurrency burns, the fewer tokens there are and the more valuable it becomes due to the rarity factor as demand overrides supply eventually. On Saturday 12th August, investors observed that the burn rate went as low as 570.54 ETH. Such figures have never been seen in the history of the Ethereum burn process with the lowest one being recorded in October 2022. The value seen here was 498.16 ETH.
The decreased rate of burning Ethereum could point to low returns for investors as inflation continues to peak in many countries. Taking a closer look at the information reveals that there has been a big change from Ethereum L1 to L2 solutions. The movement has reduced the burden on the Layer-1 Ethereum and as a result, reduced the transactions that make up the burn rate.
The reduced activity can also be attributed to the declining interest of institutions in investing in Ethereum. Reduced transactions by the institutions lead to a reduction in the value of Ethereum since there is a low buy-and-burn process. A range of factors such as economic conditions that change company policies may affect the interest of these organizations.
Ethereum Price Status
Ethereum is still leading in other sectors such as NFT sales. Therefore, despite the halving being reduced, the coin still has bullish conditions that could escalate its growth.