Ethereum’s burn rate has increased significantly, up 163% in the last week. Ethereum ($ETH) burning has been on the rise again right from the start of the year; it has spiked to a new high, and this is placing market analysts as well as traders in a position to expect even more ETH price increases in the coming days.
The daily $ETH burnt has increased by 163% over the past week!
Below is a chart showing the $ETH price and daily $ETH burnt.
From this chart, we can see that the daily $ETH burnt began to surge before the $ETH price increased in January and October 2023. pic.twitter.com/QOubaVLF2G
— Lookonchain (@lookonchain) September 25, 2024
Burn rate is the amount of the $ETH burnt through the Ethereum fee system which was implemented through EIP-1559 in August 2021. This mechanism burns a part of the transaction fees, thus decreasing the total supply of the $ETH token. If the burn rate rises, it signals a lot of on-chain activity, which in turn reflects a demand for Ethereum’s network activities such as DeFi, NFTs, and other dApps, which means that demand is on the rise.
Burn Rate Increases Before An Increase In Ethereum’s Price
In the past, Ethereum has seen spikes in burn rate before sharp rises in the price of the token. This pattern can be seen in the chart provided by Lookonchain, which tracks Ethereum’s price against its daily burn rate. The burn rate chart shows two months, January and October 2023, where the burn rate rose before ETH’s price skyrocketed.
The recent burn rate has increased by 163%, and such trends recalled the earlier trends many people are anticipating that another rise in the $ETH price is expected soon.
Currently, Ethereum’s price is at $2.6K, but with the increase in network activity, some traders and analysts are optimistic about the price rise.
Supply Dynamics and Price Impact
The price of the $ETH has been sensitive to supply and demand. More $ETH being burned, in turn, will result in less ETH in circulation, which could increase the price of the $ETH token, assuming demands remain strong.
Market participants are closely observing this scenario as Ethereum continues to grow as the leading layer-1 blockchain for smart contracts and dApps. If the burn rate is maintained for the long term, along with the growth of on-chain activities, it will signal another price hike.
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