Can Ethereum’s Burn Rate and NFT Rise Keep the Bears Away?
On the back of skyrocketing NFT activity, Ethereum is testing $1,700. On-chain calculations show that the recent decline in the ETH price may fall further in March 2023.
Ethereum (ETH) was hailed after the passing of EIP-1559, which enabled the burning of a mechanism for gas fees for network transactions. It marked the start of the disinflation era for the second largest cryptocurrency by market capitalization.
ETH burn rate cools as NFT activity slows
According to data from block explorer platform Etherscan, ETH’s daily burn volume reached a yearly high of 5,580 ETH on February 14.
Since February 14th, the number of ETH burned has decreased by more than 50% to reach 2700 ETH on March 5th. As more ETH is burned, it increases scarcity, ultimately pushing down the price.
Consequently, the decrease in the burn rate has likely significantly affected the net supply of ETH in recent weeks. And unless the trend reverses, it could push Ethereum into the bearish zone.
NFT trading volume is an indicator of a fundamental decline in Ethereum network value, leading to a potential price decline.
On-chain data from blockchain analytics firm Santiment shows that NFT trading activity on the Ethereum network has slowed since mid-February.
The chart above shows that Santiment recorded $2.34 million in NFT trades over the Ethereum network on February 6th. But NFT trading volume has since reduced to around $730,000 as of March 5.
This can pose a major concern for Ethereum holders because NFTs are a significant source of value locked, utility and fees generated on the pioneering smart contract network.
Will ETH fall below $1500 in March 2023?
The decline in Ethereum’s network value has created significant bearish concerns among ETH holders over the past week. Likewise, Global In/Out Of Money (GIOMAP) data compiled by blockchain research firm IntoTheBlock indicates that ETH could slip below $1,500.
After failing to break and hold above $1,700 multiple times, Ethereum holders can now expect a decline towards $1,360, where a cluster of 6.25 million addresses that bought 13 million ETH tokens could offer significant support. Failure to hold this level could see ETH slip further to $1,180, where another 7.3 million addresses that bought 11.14 million tokens could ease the decline.
In contrast, if ETH can break the resistance of 7.5 million addresses that bought around 26 million tokens around $1,800, it could head for a price rally towards $2,600.
In summary, the decline in NFT trading activity and the slowing burn rate in ETH gas emissions have contributed to the recent price decline. Market analysts will also be keeping a close eye on the delayed Shanghai upgrade as they position themselves for a potentially bearish March 2023 performance.
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