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Ethereum, the world’s second-largest cryptocurrency by market cap, is currently experiencing a noticeable drop in on-chain activity—a trend that’s beginning to affect its supply dynamics and price performance.
Over the last few months, fewer users have been interacting with the Ethereum mainnet. This has led to a lower burn rate—the process that permanently removes ETH from circulation—resulting in an increasing amount of ETH supply and weakening the network’s deflationary design.
Burn Rate Falls, Supply Grows
Data from Ultrasound.money reveals that over 72,000 ETH, worth more than $130 million, have been added to circulation in the past month. Ethereum’s total circulating supply now sits at 120.7 million ETH, notably higher than its levels before the Merge upgrade.
The reason? Fewer transactions. Ethereum’s burn mechanism, introduced with the EIP-1559 upgrade, relies on transaction volume to remove coins from circulation. But with activity down, the amount of ETH being burned has dropped dramatically.
According to Etherscan, Ethereum hit a yearly low in daily ETH burned on April 20, with the current burn rate down a staggering 95% compared to the start of the year.
Where Are the Users Going?
Users aren’t disappearing entirely—they’re just moving elsewhere.
Layer-2 networks like Optimism and Arbitrum are drawing users with their cheaper fees and faster transactions. On April 30, the average transaction fee on Optimism was a mere $0.024, compared to $0.18 on Ethereum. That’s more than a 7x difference.
Additionally, the rise of alternative Layer-1 blockchains like Solana—fueled recently by cryptocurrency coin hype—has diverted attention away from Ethereum. These platforms offer speed and cost advantages, making them appealing to developers and retail traders alike.
Is Ethereum Losing Its Edge?
Despite these setbacks, many experts argue that Ethereum’s core fundamentals are still among the strongest in the blockchain space.
Vincent Liu, Chief Investment Officer at Kronos Research, pointed out that Ethereum maintains the highest Total Value Locked (TVL) of any chain—currently around $368 billion—which is a strong sign of trust and ongoing use.
Still, Liu noted that Ethereum has fallen behind in daily transaction fees collected, now ranking fifth behind Tron, Solana, HyperLiquid, Bitcoin, and BNB Chain.
Temujin Louie, CEO of Wanchain, agrees that Ethereum is structurally sound, thanks to its post-Merge model that could make ETH deflationary—if on-chain activity picks up. He emphasized that Ethereum still holds a leadership position when it comes to decentralization and historical reliability.
Price Outlook: Between Pressure and Promise
Ethereum is trading at $1,834, down roughly 1% in the past 24 hours. However, technical indicators suggest there may be room for a breakout if bullish momentum continues.
The Relative Strength Index (RSI), a key signal of price movement strength, currently sits at 57.68. This indicates a mildly bullish zone—not yet overbought—which means ETH could push upward if demand returns.
A sustained price move above $2,027 is possible if buying pressure grows. But there’s a flip side. If that interest weakens, ETH could slide down toward $1,733, a level that could act as short-term support.
What Comes Next for Ethereum?
Ethereum’s long-term outlook remains strong, bolstered by its massive developer ecosystem, high TVL, and continued innovation. However, short-term headwinds—including reduced network activity, increased ETH issuance, and growing competition from rival blockchains—could create price volatility.
Investors should keep an eye on macroeconomic conditions and user trends across Ethereum’s ecosystem, especially as Layer-2 solutions and competing chains continue to evolve.
