Ethereum remains the second-largest cryptocurrency by market capitalization but its value has plummeted down to $1,810.98 as a result of minimal network usage and rising inflation. Record-low transaction fees and decreased burn rates accompany network challenges that have not appeared since 2020 according to on-chain data.
Declining Network Activity Fuels Price Drop
The period starting in 2025 has produced a continuous decline in Ethereum network active addresses which demonstrates decreasing user participation. Its decreased network activity led to average fees reaching their lowest levels ever while creating conditions opposite to those supportive of its former deflationary properties.
Lower transaction fees directly reduce its capacity to perform burn functions since the introduction of this burning process through the 2021 London hard fork.
Post-Dencun Inflation Worsens the Crisis
A March 2024 update called Dencun made Layer 2 transactions more affordable causing Ethereum to experience stronger inflationary conditions. The reduction in burned fees because of the Dencun upgrade has resulted in an inflation rate that stands as low as during the 2022 Merge transition to proof-of-stake.
The inflation rate remains persistently high because new ETH production surpasses total burn rates which makes ETH’s value weaken. Ethereum’s poor market performance in this cycle becomes more apparent when compared to Bitcoin’s stable value system.
A Challenging Road Ahead for Ethereum
The difficulties faced by Ethereum show how complex it becomes to achieve improvement in scalability alongside maintaining sustainable economics.
The low network usage alongside reduced transaction fee burning causes it to experience high inflation rates which primarily weakens investor faith in the network.
The giant crypto needs to achieve network growth together with inflation control if it plans to gain market stability in the future crypto landscape. Active addresses together with fee trends have become key on-chain metrics that the platform will have to use for developing recovery plans to restore it as a top blockchain platform.
