Ethereum could return to deflation next year.
The ETH/BTC exchange rate is experiencing some volatility.
Over the past six months, #Ethereum [ETH] supply has been growing steadily at around 60,000 #ETH per month. However, after the recent 50 basis point rate cut, this growth has slowed significantly to 30,000-40,000 ETH per month.
If this trend continues, Ethereum supply could return to deflation by early 2025 and may not even reach pre-merger levels. Further rate declines are expected, which could further reduce inflation and set the stage for future price increases.
the supply of ETH plays an important role in market dynamics. After the rate cuts, ETH inflation has declined, suggesting that supply could reach pre-merger levels in 2025.
This shift toward deflation could lead to increased demand for ETH, especially if monetary policy continues to evolve.
As interest rates fall, more users and investors will utilize the Ethereum network, increasing overall demand and potentially driving up prices. Reduced supply and stable or growing demand could support a long-term bullish outlook for Ethereum. Along with the change in supply, the number of weekly active addresses on the Ethereum Layer 2 network is rapidly increasing.
The number of active addresses currently stands at around 9.65 million, and it is predicted that this number could increase tenfold in the next few years as Web3 grows in popularity. This surge in Layer 2 activity reflects the growing demand for faster and cheaper ethereum transactions, helping to scale the network without sacrificing decentralization.
The increased user activity also leads to higher transaction fees, further reducing the overall supply of ETH through burn mechanisms such as EIP-1559.
These developments have a significant impact on the price of ETH.
ETH/BTC, on the other hand, is experiencing some volatility.
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