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While many fundamental issues in cryptocurrencies have been addressed, few anticipated the current bleak market conditions. The SEC is nearing the conclusion of its cases against cryptocurrencies, but risk appetite has plummeted to levels reminiscent of the worst days. Ethereum’s burning metric is signaling alarms. What is happening here?
ETH Burning Rate
Ethereum’s Merge transitioned to a PoS mechanism, initiating a reduction in supply. However, this trend appears to have reversed with Dencun. As the ultrasound Money narrative that previously boosted Ether demand flips, we are witnessing another historical milestone today.
The amount of burned ETH hit an all-time low over the weekend. This decline, confirming price weakness, indicates a serious contraction in network demand. The EIP-1559 change allows ETH to be burned for paying essential transaction fees, aiming to reduce inflationary pressure and witness deflationary days during periods of high network activity.
On Saturday, around 53 ETH was burned at the current price, equating to approximately $106,000. According to ultrasoundmoney data, considering the burning rate over the last week, an annual supply increase of nearly 1% is anticipated.
Future of Ethereum (ETH)
A low burning rate, when analyzed alongside active address metrics, indicates a significant drop in network activity. This decline in network activity underpins consistent losses for altcoins and is one reason for Ether’s prolonged weakness. As the price struggles to maintain above $4,000, it is fighting to stay above the $2,000 threshold in the short term.
Standard Chartered has predicted that as the number of layer2 solutions on the network increases, we will see a deterioration in ETH price performance. Previous reports illustrated how their target of $10,000 was adjusted down to the $4,000 range.
Geoffrey Kendrick, the global head of digital asset research at Standard Chartered, noted in his latest report that Coinbase has achieved massive gains through Base on the Ethereum 
$1,991 network. As assets on the Ethereum network shift to solutions like Base, the weakening of the main network has reached significant levels. It appears likely that limitations on fee concessions for layer2 solutions will be imposed soon, alongside mechanisms for generating more revenue on the main network.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.
