The Ethereum network has experienced a significant decline in its ETH burn rate, hitting the lowest levels recorded this year. This downturn is largely attributed to a reduction in base transaction fees, which have recently fluctuated between just 1 and 2 gwei, reflecting a substantial decrease in network activity.
On Saturday, the network burned only 210 ETH, marking a yearly low. This figure stands in stark contrast to the 5,000 ETH burned on August 5, when gas fees surged to around 100 gwei. The sharp reduction in the burn rate has led to an increase in network inflation, with a net emission of over 2,000 ETH on the same day.
Gnosis founder Martin Köppelmann has proposed a temporary increase in the gas limit to counter this inflationary trend. He noted that a base fee of approximately 23.9 gwei would be necessary to offset staking rewards, suggesting that boosting Layer 1 activity could be a viable strategy, even if it seems counterintuitive under the current low-fee conditions.
The drop in gas fees is largely attributed to the migration of users to Layer 2 scaling solutions and the adoption of blob transactions introduced in the Dencun upgrade in March. These advancements have effectively reduced costs on Layer 2 networks, thereby decreasing the demand for Layer 1 transactions.
Currently, ETH is trading at $2,540, reflecting nearly a 10% increase year-to-date, with a market capitalization of $305 billion.
In a related development, the New York Stock Exchange (NYSE) American has proposed a rule change to list and trade options for three Ether ETFs managed by Grayscale and Bitwise. The proposal seeks to include options for the Bitwise Ethereum ETF (ETHW), the Grayscale Ethereum Trust (ETHE), and the Grayscale Ethereum Mini (ETH).
The introduction of options trading on these Ether ETFs is expected to provide investors with a cost-effective means of gaining additional exposure to Ether. The SEC is anticipated to receive comments on this proposal within the next 21 days. If approved, the rule change would apply specifically to the Grayscale and Bitwise Ether ETFs, the only spot Ether funds currently listed on the NYSE American exchange.
Despite the launch of Bitcoin ETFs earlier this year, which now hold approximately $50 billion in assets under management, the SEC has approached the approval of options for spot Ether ETFs with caution. In July, the SEC indicated to several options exchanges, including Nasdaq, that additional time was needed to reach a decision on listing options for spot Bitcoin ETFs.
Options trading is a crucial tool for hedge funds and financial planners, allowing them to mitigate risks associated with market volatility and to implement more complex investment strategies.
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