Ethereum's supply growth is slowing, potentially leading to deflation by 2025. Increased activity on Layer 2 networks could strengthen its long-term price outlook.
Potential Return to Deflation
Ethereum's supply growth has significantly slowed following a 50 basis points rate cut. If current trends continue, Ethereum's supply could become deflationary by 2025, possibly even before pre-merge levels. This slowed inflation may drive future price growth.
Increased Demand for Ethereum
The shift to deflation could boost demand for Ethereum, especially as monetary policies evolve. As interest rates decrease, more users and investors might be attracted to Ethereum's network. A reduced supply coupled with increasing demand could support a long-term bullish trend. Additionally, the number of active addresses on Ethereum's Layer 2 networks indicates a growing demand for fast and cheap transactions.
Impact on Ethereum’s Price
These events significantly affect Ethereum's price. The current reduced inflation, combined with increased Layer 2 activity, strengthens Ethereum's long-term price outlook. If the deflationary trend persists, it could lead to higher ETH prices, particularly with high demand. Despite short-term ETH/BTC fluctuations, Ethereum's fundamentals suggest possible price growth by 2025.
Ethereum's supply slowdown and increased Layer 2 activity lay the groundwork for deflation, which could positively impact Ethereum's price in the future.
