Ethereum, the second-largest cryptocurrency by market capitalization, is poised to potentially return to a deflationary state next year. The supply of Ethereum has been steadily increasing, with approximately 60,000 ETH being added to the network each month for the past six months. However, following a recent 50 basis points rate cut, the growth in supply has slowed to between 30,000 and 40,000 ETH per month.
If this trend continues, Ethereum’s supply could become deflationary by early 2025, before reaching its pre-merge levels. With further rate cuts expected, the inflation rate may decrease even more, setting the stage for future price growth. The supply of Ethereum plays a crucial role in its market dynamics, and the recent rate cut has led to a drop in ETH’s inflation rate, indicating that the supply could return to pre-merge levels by 2025.
This potential transition to a deflationary state could drive increased demand for ETH, especially as monetary policies evolve. As interest rates decrease, more users and investors may turn to Ethereum’s network, boosting overall demand and potentially pushing the price higher. The combination of reduced supply and rising demand could support a long-term bullish outlook for Ethereum.
In addition to supply changes, there has been a significant increase in weekly active addresses on Ethereum’s Layer 2 networks. The number of active addresses has reached around 9.65 million, with projections suggesting that this number could increase tenfold in the coming years as Web3 adoption grows.
The surge in activity on Layer 2 networks reflects a growing demand for faster and cheaper transactions on Ethereum, allowing the network to scale without compromising decentralization. Higher user activity typically leads to higher transaction fees, further reducing the overall ETH supply through mechanisms like EIP-1559.
The impact of these developments on Ethereum’s price is significant. The current decrease in inflation rate, coupled with increased activity on Layer 2 networks, strengthens the long-term price outlook for Ethereum. If the deflationary trend continues into 2025, it could result in higher ETH prices, particularly as the supply decreases and demand remains high.
Meanwhile, the ETH/BTC pair has been experiencing fluctuations, with Ethereum lagging behind Bitcoin in recent months. Many analysts believe that ETH/BTC could see a further decline in the short term. The pair is currently trading within the 0.03-0.04 range, with a potential bottom forming at 0.038 or even 0.036. While some consider 0.03 as a worst-case scenario, it is unlikely to fall that low.
Despite short-term weakness in the ETH/BTC pair, the long-term outlook for ETH/USD is strong, with a rebound expected in 2025. ETH’s fundamentals suggest that its price could rise higher in the long term, making it a solid investment for investors.
In conclusion, Ethereum’s potential return to a deflationary state and the growing activity on its Layer 2 networks are driving factors for its long-term price outlook. While short-term fluctuations may occur, Ethereum remains a promising investment option for those looking to capitalize on the future growth of the cryptocurrency market. The world is constantly evolving, and with it, so are the ways in which we communicate. One of the most prominent developments in recent years has been the rise of social media as a primary means of connecting with others. With platforms like Facebook, Instagram, Twitter, and TikTok, people are able to share their thoughts, ideas, and experiences with a global audience in real-time.
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