ETH Burn Rate Hits Yearly Low on Ethereum Network

The Ethereum network has witnessed a significant drop in its ETH burn rate, reaching the lowest levels recorded this year.

The base fees for transactions, a key factor in determining the burn rate, have recently fluctuated between just 1 and 2 gwei, marking a substantial decline in network activity.

The decrease in gas fees has led to a corresponding reduction in the amount of ETH burned.

210 ETH Burned on Saturday

On Saturday, only 210 ETH were burned—a record low for the year.

This contrasts sharply with the 5,000 ETH burned on August 5, when gas fees spiked to around 100 gwei.

As a result of the lower burn rate, the network’s inflation has risen, with a net ETH emission of over 2,000 ETH on the same day.

Amid these developments, Gnosis founder Martin Köppelmann has suggested a temporary increase in the gas limit to counter the inflationary trend.

He noted that a base fee of approximately 23.9 gwei would be necessary to offset staking rewards, implying that increasing Layer 1 activity could be a viable strategy, even if it seems counterintuitive under current low-fee conditions.

The decline in gas fees is largely attributed to the migration of users to Layer 2 scaling solutions and the adoption of blob transactions introduced in the Dencun upgrade in March.

【ETH burn rate drops to lowest levels as gas fees hover at 2 gwei】

The daily amount of burned on the #Ethereum network has fallen to its lowest level this year, with base fees currently hovering between 1 and 2 gwei at the time of writing.
This decline in base gas fees… pic.twitter.com/5umz8n1LQY

— MetaEra (@MetaEraHK) August 12, 2024

These advancements have effectively reduced costs on Layer 2 networks, thereby decreasing the demand for Layer 1 transactions.

Currently, ETH is trading at $2,540, showing a nearly 10% increase year-to-date, with a market capitalization of $305 billion.

NYSE Applies with SEC to List Options for Ether ETFs

More recently, the New York Stock Exchange (NYSE) American proposed a rule change to list and trade options for three Ether ETFs managed by Grayscale and Bitwise.

The move seeks to include options for the Bitwise Ethereum ETF (ETHW), the Grayscale Ethereum Trust (ETHE), and the Grayscale Ethereum Mini (ETH).

NYSE American said that the introduction of options trading on these Ether ETFs would benefit investors by providing a cost-effective means of gaining additional exposure to Ether.

The SEC is now expected to receive comments on this proposal within the next 21 days.

If approved, the rule change would specifically apply to the Grayscale and Bitwise Ether ETFs, the only spot Ether funds currently listed on the NYSE American exchange.

Despite the launch of these Bitcoin ETFs in January, which now hold approximately $50 billion in assets under management, the SEC has taken a cautious approach.

In July, the SEC indicated to several options exchanges, including Nasdaq, that additional time was required to reach a decision on listing options for spot Bitcoin ETFs.

Options trading is a crucial tool for hedge funds and financial planners, allowing them to mitigate risks associated with market volatility.

Additionally, options form the foundation for more complex investment strategies, such as the “covered strangle” strategy promoted by the investment research firm 10x Research.