Ethereum Inflation Rises as Layer 2 Usage Grows
Ethereum (ETH) is experiencing modest but ongoing inflation, with its supply potentially hitting new highs by the end of 2024.
The Ethereum network, which recently transitioned from mining to a proof-of-stake system, has reached a record supply of 120,532,000 ETH. This high supply level was achieved as the network began burning a portion of transaction fees. Despite this, Ethereum’s total supply has risen again to 120.25 million ETH, following a brief decline to 120.07 million in April 2024.
In the second quarter of the year, Ethereum added 120,818 tokens to its supply. This increase aligns with a broader trend of growing inflation, driven by a decrease in the burn rate by 66.7% and relatively high transaction fees, which have fluctuated between $2 and $10. Meanwhile, Layer 2 (L2) solutions have seen a significant uptick in usage, with L2 transactions doubling from 2023 levels and growing another 37% in Q2.
The Ethereum network’s inflation rate has risen to an annualized 0.63%, while daily transactions have stabilized at around 1.2 million. Despite the increased supply , the Ethereum ecosystem remains robust, with major L2 chains like Optimism, Arbitrum, and Base attracting substantial traffic.
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Here is the Next Important Level XRP Needs to Break to Continue the Bullish TrendOver $12 billion is currently locked in bridges between Ethereum and various L2 solutions, predominantly in wrapped ETH and ERC-20 tokens. Although ETH has struggled to gain traction recently, failing to capitalize on the launch of new ETFs, it shows signs of potential recovery. Historical data indicates that August is typically a weak month for ETH, but current market conditions and upcoming ETF inflows could lead to a rebound, with resistance levels set around $3,800 and potential support near $3,000.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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