The supply of Ethereum is significantly increasing due to declining gas fees: Kaiko Report

  • Due to the Dencun upgrade and increased Layer 2 activity, Ethereum gas fees have dropped to a level not seen in five years.
  • Since April, the total supply of ETH has increased steadily due to a decrease in gas prices, which reduces the amount of ETH burned.

Because of the increase in layer 2 operations and the March deployment of the Dencun update, Ethereum has reportedly reached its five-year minimum fee.

Ethereum Supply is Affected by Gas Fees

Ethereum gas prices were decreased as a result of layer 2 networks being able to process their data blobs directly on the Ethereum mainnet thanks to the Dencun upgrade.

Ethereum is significantly impacted by the decline in gas prices (ETH). Even less ETH is now anticipated to be burned because less money is lost to fees, which favorably affects the token’s total supply.

The overall amount of ETH in circulation has been steadily rising since April. Therefore, price-inhibiting supply increases may offset even strong demand factors like the listing of spot Ethereum ETFs in the near future.

Gas prices are paid in Gwei, ether’s less significant unit of currency. The purpose of this is to pay the validators for keeping the Ethereum network safe. These costs are based on network capacity, supply, and demand, and they typically increase during times of congestion.

Whale Activity Declines Amid Market Uncertainty

Conversely, fresh information suggests that Ethereum whale activity may be declining as well. Santiment claims that there was a sharp decline in ETH transactions valued at least $100,000, from 5,371 on August 12 to 2,138 at the time of publication.

According to Kaiko’s study, the market was also impacted by general financial difficulties. Financial markets interpreted the Bank of Japan’s late-July increase in certain of its policy rates as an indication of increased volatility.

Trading volumes on Japanese cryptocurrency exchanges like Bitbank and Bitflyer soared to their greatest levels since early March when Bitcoin achieved fresh record highs, causing a significant sell-off at the start of August.

Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.

Author: Puskar Pande

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