- Ethereum could return to deflation next year.
- ETH/BTC has experienced some volatility.
Ethereum supply [ETH] It has been steadily growing at around 60,000 ETH per month for the past 6 months. However, after the recent 50 basis point rate cut, this growth has slowed significantly to between 30,000 and 40,000 ETH per month.
If this trend continues, Ethereum supply could return to deflation by early 2025 before reaching pre-merger levels. If further rate cuts are expected, inflation could fall further, setting the stage for future price increases.
Ethereum supply plays a key role in its market dynamics. Since the rate cut, ETH inflation has declined, suggesting that supply could reach pre-merger levels in 2025.
This deflationary shift is likely to increase demand for ETH, especially as monetary policy continues to evolve.
Lower interest rates may attract more users and investors to the Ethereum network, increasing overall demand and potentially pushing the price higher.
Decreasing supply and stable or increasing demand could support a long-term bullish outlook for Ethereum.
In addition to changes in supply, weekly active addresses on Ethereum's Layer 2 network are rapidly increasing.
Currently, these active addresses number approximately 9.65 million, and it is predicted that this number could grow tenfold over the next few years as Web3 adoption increases.
This surge in activity on the Layer 2 network reflects the growing demand for faster and cheaper transactions on Ethereum, which will help scale the network without compromising decentralization.
Typically, an increase in user activity correlates with an increase in transaction fees, which further reduces the overall ETH supply through write mechanisms like EIP-1559.
Impact on ETH price
The impact of these developments on the price of ETH is significant. The current decline in inflation, coupled with increased Layer 2 activity, strengthens Ethereum's long-term price outlook.
If the deflationary trend continues until 2025, it could lead to an increase in ETH prices, especially as demand is high while supply decreases.
There will probably be demand for long runs in the low range up to FVG. Conversely, a sweep at the high of the range will induce a short, while a close above the range means no trade will take place.
On the other hand, ETH/BTC is experiencing some volatility. Ethereum has lagged behind Bitcoin in recent months, and many analysts believe that ETH/BTC could fall in the short term.
The pair is currently trading within a range of 0.03 to 0.04, with a bottom likely forming at 0.038 or 0.036. Some consider 0.03 as a worst-case scenario, but it's unlikely to go that low.
read ethereum [ETH] Price prediction for 2024-2025
Still, while ETH/BTC may remain depressed until the end of 2024, the long-term outlook for ETH/USD is stronger, with a recovery expected in 2025.
Despite short-term weakness in the ETH/BTC pair, ETH fundamentals suggest that ETH price could rise further in 2025, making it a solid long-term bet for investors. .