Nikolas Sargeant
The Ethereum network has recently witnessed an unprecedented decline in its ETH burn rate, reaching the lowest levels recorded in 2024. This significant drop is primarily attributed to a substantial decrease in network activity, reflected in the base fees for transactions hovering between a mere 1 and 2 gwei. The reduced gas fees have directly contributed to a sharp reduction in the amount of ETH burned.
Saturday's Burn Rate Hits Rock Bottom
On a recent Saturday, the Ethereum network burned only 210 ETH, marking a record low for the year. This figure starkly contrasts with the 5,000 ETH burned on August 5, when gas fees surged to approximately 100 gwei. The diminished burn rate has led to increased network inflation, with a net ETH emission exceeding 2,000 ETH on the same day.
In response to these developments, Gnosis founder Martin Köppelmann proposed a temporary increase in the gas limit to counteract the inflationary trend. Köppelmann suggested that a base fee of around 23.9 gwei would be necessary to offset staking rewards, indicating that boosting Layer 1 activity could be a viable strategy, despite seeming counterintuitive in the current low-fee environment.
The significant reduction in gas fees is largely attributed to two factors: the migration of users to Layer 2 scaling solutions and the implementation of blob transactions introduced in the Dencun upgrade last March. These advancements have effectively lowered costs on Layer 2 networks, consequently decreasing the demand for Layer 1 transactions.
As of the latest data, ETH is trading at $2,540, representing a nearly 10% increase year-to-date, with a market capitalization of $305 billion.
NYSE Seeks SEC Approval for Ether ETF Options
In a related development, the New York Stock Exchange (NYSE) American has submitted a proposal to the Securities and Exchange Commission (SEC) for a rule change that would allow the listing and trading of options for three Ether ETFs managed by Grayscale and Bitwise. The proposal includes options for the Bitwise Ethereum ETF (ETHW), the Grayscale Ethereum Trust (ETHE), and the Grayscale Ethereum Mini (ETH).
NYSE American argues that introducing options trading on these Ether ETFs would provide investors with a cost-effective method to gain additional exposure to Ether. The SEC is expected to open a 21-day comment period on this proposal.
If approved, the rule change would apply specifically to the Grayscale and Bitwise Ether ETFs, currently the only spot Ether funds listed on the NYSE American exchange. Despite the successful launch of Bitcoin ETFs in January, which now manage approximately $50 billion in assets, the SEC has maintained a cautious stance on crypto-related financial products.
In July, the SEC informed several options exchanges, including Nasdaq, that more time was needed to decide on listing options for spot Bitcoin ETFs. Options trading is considered a vital tool for hedge funds and financial planners, offering a means to mitigate risks associated with market volatility.
Furthermore, options serve as the foundation for more sophisticated investment strategies, such as the "covered strangle" approach promoted by the investment research firm 10x Research.
