ETH Heading to $1.2K? Ethereum’s Deflation Ends as Fees Hit Record Lows
Ethereum (ETH) faces renewed bearish pressure as declining network activity and historically low transaction fees signal potential further downside. Technical indicators suggest ETH could drop toward $1,200.
Ethereum Network Activity Declines Sharply
Ethereum’s price recently plunged nearly 50%, from a high of $3,432 on January 31 to a 16-month low of $1,750 on March 11, amid market turmoil triggered by tariff threats from U.S. President Donald Trump. Although ETH rebounded slightly, it has repeatedly failed to break above the critical $2,000 resistance level.
On-chain data highlights Ethereum’s weakening fundamentals:
- Daily transaction counts have fallen to levels last seen in October 2024.
- Average transaction fees reached an all-time low of 0.00025 ETH ($0.46) on March 24.
Lower transaction counts and fees indicate reduced demand for Ethereum block space, reflecting diminished market confidence and interest in decentralized applications (DApps), DeFi, and NFTs.
ETH Supply Inflation Returns
Ethereum’s declining transaction fees have significantly reduced the ETH burn rate, reversing the deflationary trend initiated by the Merge to proof-of-stake (PoS) in September 2022. According to Ultrasound.money:
- ETH burn rate has dropped to approximately 25,000 ETH per year.
- Annual supply growth has risen to 0.76%, with issuance reaching 945,000 ETH per year.
- Total ETH supply has now surpassed pre-Merge levels, marking a return to inflationary conditions.
Technical Analysis: Bear Flag Targets $1,230
Technical analysis further supports bearish sentiment. ETH/USD has formed a bear flag pattern on the daily chart, a bearish continuation pattern signaling potential further declines. A decisive daily close below the flag’s lower boundary at $2,000 could trigger a significant sell-off, targeting approximately $1,230—a 40% drop from current levels.
However, some analysts remain optimistic:
- Analyst Jelle notes ETH is attempting to reclaim the critical $2,200 support level, suggesting a potential bullish reversal.
- Crypto Caesar argues Ethereum is “heavily undervalued” and believes the current price action represents a bottoming phase.
Summary and Key Points
- Ethereum’s network activity and transaction fees have dropped to historic lows.
- ETH supply inflation has returned due to reduced burn rates.
- Technical indicators suggest a potential drop toward $1,230 if bearish momentum continues.
- Some analysts see current levels as undervalued and a potential bottom.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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