While the supply of bitcoin is slowing after the halving, the supply of ether is growing at its fastest rate since 2022, according to CryptoQuant — crushing some investors' dreams of ether as an asset that will grow exponentially. CryptoQuant, which analyzes transaction data from public blockchain networks, said in a report this week that transaction fees on Ethereum are lower thanks to the latest technical upgrade, dubbed Dencun, which occurred in March of this year. Average transaction fees are now about 4x lower than before Dencun for the same level of network activity. As a result of lower transaction fees – one of the goals of the Dencun upgrade – the amount of ETH burned is also lower, and is at one of its lowest levels since the September 2022 merger. Meanwhile, the supply of Ethereum is growing at its fastest pace since the merger, putting at risk the investment narrative that it They will become more rare over time, according to CryptoQuant. “(Some) investors were considering exposure to Ethereum based on the premise that it was becoming more scarce, and there was less supply,” said Julio Moreno, head of research at CryptoQuant. “After this, this thesis is not valid anymore.” “This has really changed the fee structure, the new issuance structure of Ethereum, and the growth of supply,” he added, referring to Dincon. Ethereum has undergone several protocol upgrades over the years that have affected its monetary policy, or the rewards paid to network validators. The 2022 merger shifted Ethereum from proof-of-work to proof-of-stake, not only to make its infrastructure more energy efficient but also to help slow the rate of supply growth. Some investors had hoped that ethereum could compete with bitcoin, the growth rate of its supply slows every four years after the halving. For many, this idea was a side-effect of the basic thesis about Ethereum, which is that it is a growing, scalable transaction network on which applications can be built. That narrative is still alive and well, Moreno said. “This hypothesis is supported by this (Dencun) upgrade… because it actually made Ethereum cheaper, and made it more scalable,” he said. Moreno said the trend of enhanced supply will be difficult to reverse, given the decline in fees being burned even though network activity remains strong. Historically, as network activity rises, the burn rate will rise. Network activity would have to increase by 3-4 times to reverse the trend of increasing supply, if this relationship continues, he said.
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Ether supply is growing at its fastest level since the 2022 “merge.”
