Spike in congestion on the Ethereum blockchain network has seen ETH burn rate rise to eclipse its supply in the network. The second most valuable cryptocurrency is fielding signs of deflation as its burn rate in the network has exceeded supply for the fifth consecutive day this week. Crypto industry boom post-Covid-19 has led to the increased relevance of crypto tech globally, with derivatives being integrated rapidly in different sectors.
The nonfungible token (NFT) Metaverse is a largely successful offshoot of blockchain technology. It is wholly leveraged on the Ethereum blockchain network and utilizes unique digital prints created with blockchain tech to portray digital collectibles and art.
The utility of the Ethereum network that saw the NFT industry balloon to over $3 billion last year by total market capitalization has attracted investors globally in large numbers and boosted popularity to an all-time high.
Ethereum Burn Rate Spikes
The increased popularity of the NFT sector of the crypto industry has resulted in an exponential increase in Ethereum network congestion and workload, consequently increasing transaction fees on the network. The transaction fee has jumped to almost 250 Gwei earlier this week, and during critical congestion periods, it had reached up to 300 Gwei.
On-chain monitoring platform the WatchTheBurn Service has revealed that the second-largest crypto has been burning as much as 17,000 ETH every day for the past five days. According to the platform’s report, approximately 600 ETH, equivalent to about $2 million, is burned on average each hour.
Ethereum’s supply this week can’t keep up with the burn rate it has fielded this week. Should this momentum be maintained, ETH price is on track for deflation, analysts have revealed.
Ethereum Price Deflation Imminent
Stats reported by on-chain analysis of ETH met supply this week have indicated a deflationary trend of the crypto token. Ethereum network activity this week has mirrored previous deflationary weekly periods in the crypto market. As can be inferred from the burn rate, over 10,000 ETH equivalent of $35 million has been burned out of circulation this week alone.
Over the last seven days, traders have funded rewards worth over $320 million and tips worth over $32 million through gas fees and tips to miners. Leading On-chain analytics Glassnode had previously reported a two-month all-time high of miners’ income on the network.
Further on-chain indicators indicate a rapid increase in the Ether network activity, with stats revealing the increase in the number of addresses transacting ETH since year start.
Ethereum Price Activity
As the crypto market begins to gather momentum and correct the year start consolidation phase, ETH has fielded a 9% price increase through the last four days despite market indicators suggesting investors’ pessimism on the tokens outlook.
Earlier this week, analysts have revealed that ETH Relative Strength Index (RSI) indicator has hit a two-year all-time low as the price dropped below the $3,200 support region. ETH currently trades at $3,372 at press time, with its daily price chart showcasing neutral price performance.