Activity on the Ethereum network has noticeably decreased in recent months. This has slowed down the process of burning ETH — the key mechanism that should gradually reduce the total supply of the cryptocurrency over time.
When the network burns fewer tokens, more ETH remains in circulation, creating downward pressure on the price. This is why the second-largest cryptocurrency is struggling to hold above the $2,000 mark.
Ethereum's supply is increasing due to decreased activity on the network. When users conduct fewer transactions, the EIP-1559 mechanism burns fewer tokens. Etherscan statistics show: since the beginning of the year, the volume of burned tokens has decreased by 95%. A record low was set on April 20, when the network recorded the minimum daily amount of burned coins.
Why are users leaving Ethereum?
Many users and developers are transitioning from Ethereum to second-layer (L2) solutions, such as Optimism and Arbitrum. In these networks, transaction processing fees are lower and the speed is higher. For example, as of April 30, the average transaction fee in the Optimism mainnet was only $0.024. In comparison, in the Ethereum network, the transaction cost users seven times more, averaging $0.18.
Will ETH be able to break $2,000?
There is buying pressure in the spot markets. This is evidenced by the rise in the Relative Strength Index (RSI) for Ethereum. The RSI is currently at 57.68, indicating a predominance of bullish sentiment. If buyer activity is maintained, ETH may surpass the $2,027 mark. However, if buyers ease their pressure, the price risks retreating to the $1,733 level.
Thus, in the coming months, the fate of ETH will depend on three key factors: the ability to attract users back to the main network, the effectiveness of the token burning mechanism, and the overall sentiment in the crypto market. While the price is balancing between levels of $2,027 and $1,733, investors should closely monitor network activity metrics — these could be decisive in determining the further trend.