Ethereum
Has the Ultra Sound Money Era Ended?
Ethereum (ETH) which is addressed as ultra-sound money due to its deflationary supply method, now appears to be facing new challenges that have prompted some analysts to question whether this narrative still holds.
A prominent crypto analyst, Thor Hartvigsen, recently highlighted this issue in a detailed post on X, where he discussed the current state of Ethereum’s fee generation and supply dynamics.
Is ETH No longer Ultra-Sound money?
Hartvigsen pointed out that August 2024 is “on track to be the worst month in terms of fees generated on the Ethereum mainnet since early 2020.” This decline is largely attributed to the introduction of blobs in March, which allowed Layer 2 (L2) solutions to bypass paying significant fees to Ethereum and ETH holders.
As a result, much of the activity has shifted from the mainnet to these layer two (L2) solutions, with most of the value being captured at the execution layer by the L2s themselves.
Consequently, Ethereum has become net inflationary, with an annual inflation rate of approximately 0.7%, meaning that the issuance of new ETH currently outweighs the amount being burned through transaction fees.
Hartvigsen disclosed the impact of this on Non-Stakers and Stakers: According to the analyst, non-stakers primarily benefit from Ethereum’s burn mechanism, where base fees and blob fees are burned, reducing the overall supply of ETH.
However, with blob fees often at $0 and the base fee generation decreasing, non-stakers are seeing less benefit from these burns. At the same time, priority fees and Miner Extractable Value (MEV), which are not burned but rather distributed to validators and stakers, do not benefit non-stakers directly.
Additionally, the ETH emissions that flow to validators/stakers have an inflationary effect on the supply, which negatively impacts non-stakers. As a result, the net flow for non-stakers has turned inflationary, especially after the introduction of blobs.
For stakers, the situation is somewhat different. Hartvigsen revealed that stakers capture all the fees, either through the burn or via staking yield, meaning that the net impact of ETH emissions is neutralized for them.
However, despite this advantage, stakers have also seen a significant drop in the fees flowing to them, down by more than 90% since earlier this year.
This decline raises questions about the sustainability of the ultra-sound money narrative for Ethereum. To answer that, Hartvigsen sated
Ethereum no longer carries the ultra sound money narrative which is probably for the better.
What’s Next For Ethereum?
So far, it is quite evident with the current trends that Ethereum’s ultra-sound money narrative may no longer be as compelling as it once was.
With fees decreasing and inflation slightly outpacing the burn, Ethereum is now more comparable to other Layer 1 (L1) blockchains like Solana and Avalanche, which also face similar inflationary pressures, says Hartvigsen.
Hartvigsen notes that while Ethereum’s current net inflation rate of 0.7% per year is still significantly lower than other L1s, the decreasing profitability of infrastructure layers like Ethereum may necessitate a new approach to maintaining the network’s value proposition.
One potential solution the analyst discussed is increasing the fees that L2s pay to Ethereum, though this could pose competitive challenges. Concluding the post, Hartvigsen noted:
Zooming out, infra-layers are in general unprofitable (study Celestia generating ~$100 in daily revenue), especially if viewing inflation as a cost. Ethereum is no longer an outlier with a net deflationary supply and, like other infra-layers, require another way to be valued.
Featured image created with DALL-E, Chart from TradingView
Ethereum (ETH) continues to underperform in the broader cryptocurrency market, currently trading just below $1,800 after falling 4% in the past 24 hours. Despite a strong start to the year, where the crypto market experienced bullish momentum, ETH has failed to sustain its upward trajectory.
Since slipping below the $3,000 level, the asset has largely ranged downward and has now breached the $2,000 support zone, signaling weakening demand and sentiment.
While Bitcoin and other major digital assets still managed to see some recovery efforts in recent weeks, Ethereum’s price decline has been accompanied by decreasing network activity and weakening on-chain fundamentals.
This divergence has raised concerns over ETH’s short-term outlook and prompted a fresh analysis of the underlying causes driving the asset’s performance.
Fee Decline and Network Inactivity Fuel Inflationary Pressures
CryptoQuant analyst EgyHash recently published a report highlighting key on-chain metrics that suggest Ethereum’s current market weakness is closely tied to its declining fee economy and user activity.
According to the report titled: “Why Ethereum Is Bleeding Value: Fee Crash Meets Hyperinflation Hellscape.” Ethereum’s network is experiencing its lowest levels of activity since 2020.
Daily active addresses have declined steadily since early 2025, and average transaction fees have dropped to record lows. This reduction in activity has led to a sharp fall in Ethereum’s burn rate, a metric crucial in offsetting inflationary pressures following the network’s transition to proof-of-stake.
The Dencun upgrade, which was expected to enhance network efficiency, has coincided with an extended period of low transaction volumes, further reducing fee income and contributing to higher net ETH issuance.
EgyHash concludes that the confluence of weak network engagement, reduced burn rate, and high token inflation is central to Ethereum’s declining valuation.
Why Ethereum Is Bleeding Value
“Ethereum’s recent underperformance can be largely attributed to diminished network activity, as evidenced by declining active addresses and reduced transaction fees.” – By @EgyHashX pic.twitter.com/fgQJYCrOIn
— CryptoQuant.com (@cryptoquant_com) April 3, 2025
Ethereum Technical Outlook Signals Potential Support
Despite on-chain headwinds, some technical analysts maintain a cautiously optimistic view. Trader Courage, a technical analyst on X, noted that Ethereum is currently testing a major support zone and could rebound toward the upper resistance of its current trading range.
Back at the green support line. Looks like we could be heading towards the top of the range.
Key levels are on the chart.#Ethereum pic.twitter.com/rRX8b3b6nW
— Trader Courage
(@CryptoCourage1) April 3, 2025
Another market analyst, CryptoElite, shared a long-term ascending trendline that ETH has respected historically. Based on this trend, the analyst believes ETH could still have the potential to rally to $10,000 later in the year, provided broader market conditions improve.
Featured image created with DALL-E, Chart from TradingView
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Ethereum (ETH) continues failing to reclaim the $2,100 resistance, dropping 6% in the past week. As the second largest crypto trades within its “make or break” levels, some market watchers suggest it will continue to move sideways before another major move.
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Ethereum Trades At 2023 Levels
After closing its worst Q1 since 2018, Ethereum continued moving sideways, hovering between the $1,775-$1,925 price range. Amid last Monday’s recovery, Ethereum traded only 6% below its monthly opening, eyeing a potential positive close in the monthly timeframe.
Nonetheless, the cryptocurrency fell over 10% from last week’s high to close the first quarter 45.4% below its January opening and 18.6% from its March opening. Moreover, it registers its worst performance in seven years, recording four consecutive months of bleeding for the first time since 2018.
Daan Crypto Trades noted that ETH is “still trading in no man’s land” despite its recent attempts to break above its current range. In early March, Ethereum dropped below the $2,100 mark, losing its 2024 gains and hitting a 16-month low of $1,750.
The trader suggested that the crucial levels to watch are a breakdown below $1,750 or a breakout above $2,100. “Anything in between is just going to be a painful chop,” he added.
Another market watcher, Merlijn The Trader, highlighted that ETH is at 2021 levels, pointing that it is trading within the breakout zone that led to Ethereum’s all-time high (ATH) but has stronger fundamentals and more institutional demand four years later.
“ETH is sitting on the same monthly support that ignited the 2021 bull run. Hold it, and $10K is in play. Lose it… and things get ugly,” he detailed.
More Chop Before ETH’s Next Move?
Analyst VirtualBacon considers that Ethereum will continue to trade within its current price range for the time being. He explained that ETH’s price has fallen to retest the last bear market resistance levels, as it has erased all its gains since November 2023.
The analyst considers this zone a “good value range” but doesn’t expect the cryptocurrency to break out “right away.” However, he added that a bullish breakout is “simply a matter of time” in longer timeframes.
“Ethereum always catches up when the Fed pivots and the global liquidity index beings to uptrend. That’s when you see the ETH/BTC ratio start to turn up again, leading the rest of the altcoin market,” he concluded.
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Ali Martinez pointed out that the number of large ETH transactions has significantly declined in over a month, dropping 63.8% since February 25.
During this period, large transactions fell from 14,500 to 5,190, signaling a drop in whale activity on the network. He also noted that whales have sold 760,000 ETH in the last two weeks.
As of this writing, Ethereum trades at $1,903, a 6% drop in the weekly timeframe.
Featured Image from Unsplash.com, Chart from TradingView.com
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Crypto analyst Klejdi has indicated that Ethereum’s pain is far from over, with the second-largest crypto by market cap set to suffer a further downtrend. Specifically, he warned that ETH could still drop to as low as $1,400 before it finds a bottom.
Ethereum May Still Drop To As Low As $1,400
In a TradingView post, Kledji stated that Ethereum may drop to $1,400, providing a bearish outlook for the altcoin, which has underperformed other top cryptocurrencies. The analyst noted that ETH lost nearly 12% of its value within just three days after breaking out of its recent pattern last Friday.
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He further mentioned that Ethereum’s movement and the rest of the crypto market are closely tied to Bitcoin. As such, this ETH crash is likely to happen, seeing as the flagship crypto has dropped to $81,300 and is already showing signs of further decline.
Klejdi highlighted in his accompanying chart that ETH will likely consolidate near its current level before continuing to move lower. However, the chart showed that the move to this $1,400 target will likely happen this month.
In the meantime, the analyst believes it would be wise to wait for Ethereum’s price to form another bearish pattern before entering a trade. He again reaffirmed that there is a strong possibility that ETH may extend its drop to $1,400.
Ethereum whales are already capitulating ahead of this projected price crash. Onchain analytics platform Lookonchain revealed an ETH OG that has sold off all its holdings. This investor bought 5,0001 ETH while trading at $277 in 2017 and didn’t sell when the altcoin hit its ATH during the last bull run. The whale started selling last month, possibly giving up on Ethereum making a comeback anytime soon.
ETH Will Still Reach New Highs
Crypto analyst Virtual Bacon is still confident that Ethereum will reach new highs. He noted that ETH is back at its key bear market breakout zone, retesting the $1,700 and $2,100 range. He predicts that the altcoin will continue to chop around this range in the short term. However, he remarked that Ethereum tends to catch up fast once the US Federal Reserve pivots and global liquidity turns.
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Crypto analyst Crypto Patel affirmed that Ethereum’s biggest run is coming. He stated that Q2 to Q4 of this year will be life-changing for ETH. The analyst added that this could be the cycle top window and advised market participants not to miss it. Crypto Patel advised that they should accumulate between $1,900 and $1,300 with the target of between $7,000 and $10,000 in mind.
At the time of writing, the Ethereum price is trading at around $1,850, up in the last 24 hours, according to data from CoinMarketCap.
Featured image from iStock, chart from Tradingview.com
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