The post Low Ethereum gas fees could drive $1.6 billion supply growth appeared on BitcoinEthereumNews.com.

Pseudonymous crypto analyst Ember CN has said the drop in Ethereum gas fees could increase its annual supply by almost $1.6 billion. This comes in light of the gradual increase in ETH supply in recent months and the concerns about the potential impact on price. According to data from Ultrasoundmoney, the ETH supply has increased by over 228,717 ETH in the past four and a half months, from 120,063,605 ETH in April to around 120,292,322 ETH. Many believe the increase shows that ETH has become an inflationary asset, a reversal of its previous deflationary status. Ethereum network produces over 1,600 ETH daily The increase in ETH supply is due to its low burn rate, which in turn is due to the low network fees, a result of the Dencun upgrade. While many consider the low fees to be good for Ethereum usage, they have also reduced the burn rate on the network, resulting in more ETH being issued than destroyed. Ember CN analyzed the growth rate of ETH supply since the upgrade, noting an average daily increase of 1,652 ETH. When annualized, Ether supply will grow by 600,000 ETH, which is $1.59 billion at its current price. He wrote: “If the subsequent ETH chain activity continues to be sluggish, according to this output data, the annual inflation will be 600,000 coins, which is worth $1.59 billion at the current price, with an inflation rate of 0.5%.” Consequently, he noted that the only way to fix this is if Ethereum activity increases. However, that might be unlikely given how  layer-2 networks such as Arbitrum, Optimism, and Base now dominate Ethereum transactions. This is in part due to the even lower fees on those networks. ETH inflation is not that big of a deal Despite the inflationary turn in ETH supply, the…

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Filed under: News - @ August 22, 2024 7:22 pm