Ethereum, long regarded as the leading smart contract platform, is currently navigating through a period of noticeable decline. The network’s burn rate—once a signal of robust activity—has dropped to its lowest level since the implementation of EIP-1559, raising concerns about shrinking demand and waning momentum.
Recent data reveals that only 53.07 ETH, worth approximately $106,000, was burned over the weekend, marking a significant reduction in the network’s economic throughput. This sharp drop is the clearest indicator yet that Ethereum’s blockspace is experiencing less pressure, a reflection of diminishing transaction volumes and user engagement. As highlighted in COINOTAG’s latest analysis, “The recent burn rate of just 53.07 ETH starkly illustrates the diminishing demand for Ethereum’s blockspace.”
This slowdown carries broader implications. EIP-1559, introduced to help stabilize fees and curb inflation by burning a portion of transaction fees, now appears less effective as overall network usage contracts. With the current annual supply growth rate of Ethereum forecasted at 0.76%, analysts are questioning whether the network’s deflationary promise during periods of peak activity will hold true moving forward.
Further compounding concerns are Ethereum’s declining network metrics. The seven-day moving average of active addresses has slipped to its lowest level since October 2024. Other indicators, including new address creation and total transaction count, also show signs of stagnation. Together, these figures suggest the network is grappling with more than just short-term volatility—it may be facing structural challenges in maintaining relevance and user engagement.
One of the most striking reflections of Ethereum’s shifting landscape comes from Standard Chartered, which recently revised its Ethereum price projection for 2025. Previously set at $10,000, the forecast has now been slashed to $4,000. This sharp downgrade underscores how the rise of Layer 2 solutions, such as Base, is reshaping the value distribution within the Ethereum ecosystem. Geoffrey Kendrick, head of digital assets research at the bank, explained that “Layer 2s, and Base in particular, now extract super-profits from the Ethereum ecosystem,” emphasizing the competitive pressures mounting against Ethereum’s main network.
Looking ahead, Ethereum’s future hinges on how it responds to these mounting pressures. Without strategic innovations to rejuvenate user demand or seamlessly integrate Layer 2 developments, Ethereum risks ceding ground to emerging competitors. The need to bolster network activity, incentivize participation, and refine scalability solutions has never been more urgent.
As Ethereum navigates this critical juncture, both investors and developers will be closely watching how the network adapts. Whether it can recapture its deflationary momentum and maintain its leadership position in an increasingly competitive blockchain landscape remains to be seen.
By Alejandro Silva Ramírez, Crypto Analyst & Columnist