Kaiko: Ethereum's gas price has fallen to a five-year low

What’s new? As reported by analysts at Kaiko, the cost of gas on the Ethereum blockchain has fallen to a five-year low. This is largely due to the March Dencun upgrade, which reduced fees on Ethereum-based Layer 2 (L2) networks by 60-90%, as well as an increase in activity on those networks. The reduction in fees on the underlying blockchain has an impact on the native ETH token, increasing its supply.

Kaiko report

What else is known? As a result of The Merge hard fork in September 2022, Ethereum switched to the Proof of Stake (PoS) consensus algorithm and also implemented a mechanism to burn coins paid as transaction fees. Such a mechanism is designed to curb the asset's supply growth — as new coins are issued via staking — as well as prevent inflation.

Due to the fact that fees have fallen, the volume of coins being burned has also decreased. According to analysts at Kaiko, the supply of ETH has been steadily increasing since April this year. They believe that this factor may limit the asset's price growth in the near term, despite demand from spot exchange-traded funds (ETFs) based on it, which were launched in the United States on July 23.

Thus, just less than a month ago, the US securities regulator SEC permitted nine spot ETH-ETFs to be traded on the Nasdaq, NYSE and Cboe stock exchanges. At the moment, the total flow on these products is negative (-433,62 million), which is explained by outflows from Grayscale's ETHE fund.

It is not new and previously operated as a trust with no unit redemption option. Along with the conversion to a spot ETF, clients now have the option to withdraw funds, which many have rushed to take advantage of, given that the product charges the highest management fee in the industry (2,5%).

Considering only the new eight funds, including the mini trust from Grayscale under the ETH ticker, all are showing positive results, with total inflows exceeding $2 billion. The best by this indicator is the ETHA fund from the world's largest investment company, BlackRock (+977,62 million).

From mid-April through the end of June alone, ETH supply grew by 112 000 coins. In August, analysts at aggregator CoinGecko reported that supply had increased by 75 301 ETH since the beginning of the year: 465 657 coins were burned, while 540 958 were issued.

They later added that the largest share of burned ETH comes from the leading decentralized crypto exchange (DEX) Uniswap — 71 915 coins have been removed from circulation with its help since the beginning of the year. Overall, the top 10 largest “burners” of the asset account for 39,2% of the destroyed coins.

Source: X.com