Ethereum Burns Jump 160% in the Past Week: What’s Behind the Spike?

• Ethereum (ETH) burns have quietly surged over the past week.
• The surge appears linked to growing speculative activity.
• Spikes in ETH burns have historically lined up with price rallies.

For a long time, the primary narrative behind Ethereum (ETH) has been that the asset was deflationary thanks to a token burn mechanism implemented in 2021 and reduced token issuance achieved with the famous Merge hard fork in 2022.

However, ETH’s token dynamics have significantly changed since the March 2024 Dencun upgrade , which significantly brought down fees across the Ethereum network and drove volumes to Layer 2 chains . Drastically lower fees and activity have meant drastically lower burns, leading to ETH losing its deflationary status .

As the Ethereum community still grapples with this new reality , ETH burns have recently shown signs of a resurgence. What’s behind this spike, and should investors be excited?

A Speculative Fever Brewing on Ethereum?

Ethereum (ETH) burns have quietly surged over the past week. According to Etherscan data , daily ETH burns have increased steadily over the past week, jumping a staggering 156% from 898 ETH burnt on September 18 to 2,298 ETH on September 25. 

So, what is driving this surge?

ultrasound.money data shows that the recent surge in ETH burns appears linked to growing speculative on-chain activity. Per the dashboard, the top application driving burns is Uniswap , with the bulk of the swaps on the DEX seemingly involving memecoins, per Arkham Intelligence data . Other applications driving ETH burns include ETH transfers and Telegram trading bot Maestro, often used for speculative memecoin activity. 

The specific reason for this surge in speculative activity is unclear. Still, the timing lines up with the Federal Reserve’s decision to cut interest rates for the first time in four years, a pivot many believe would incentivize risk-on investments and fuel the continuation of what is considered a crypto bull cycle.

Is This Soaring Activity Bullish for ETH?

Whether or not the recent speculative activity on Ethereum can be termed bullish depends on whether it can be sustained and gather momentum. If sustained, it can raise demand for ETH and see capital rotate into other ecosystem projects.

As highlighted by crypto smart money tracker Lookonchain on Wednesday, September 25, a surge in daily ETH burns had preempted price rallies in January and October 2023.

ETH has already shown tentative signs of strength over the past week. The asset has outperformed Bitcoin (BTC), jumping over 7%, while Bitcoin has only gained about 2%.

On the Flipside 

• Ethereum remains inflationary despite the recent surge in burns.
• Whether the recent speculative fever on Ethereum can gather momentum remains to be seen.

Why This Matters

The spike in Ethereum burns is a departure from the recent norm on the network. It raises the question of whether network dynamics are shifting yet again.

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