Deflationary Advantage Erodes
Since the Ethereum merge, 55.4% of newly issued Ether (ETH) has been burned, a mechanism that defined the network’s deflationary status. However, this structural advantage is narrowing. Data reviewed by AMBCrypto shows that the percentage of newly issued ETH burned over the last thirty days has dropped to 2.7%. Consequently, Ethereum’s yearly supply growth has increased to 0.86%, slightly exceeding Bitcoin’s yearly supply growth of 0.82%.
The decline in burn activity coincides with a sharp reduction in network usage costs. Gas prices on Ethereum Layer 1 fell from 2.76 Gwei to 0.03 Gwei in a two-day period. While lower gas prices reduce transaction costs for users, they can also signal weaker demand for block space. This shift has fueled debate regarding the network’s activity levels, with some comparisons drawing parallels to Solana (SOL).
On-Chain Activity Remains
CryptoQuant data provides a broader look at network engagement despite the slower burn rate. Ethereum Velocity, a metric that tracks the speed of asset movement, stands at 11.03. Additionally, the number of active addresses on the network reached 627,000. These figures suggest that while fee generation has slowed, base-layer activity remains present.
Strong Layer 1 activity is suggested to offset the eroded deflationary edge. If transaction volume sustains, it may support network utility even as the net issuance of new ETH outpaces the amount burned in fees.
Whales Accumulate Amid Cooling Activity
Despite the cooling overall whale activity, specific segments of the market are showing increased conviction. Data indicates that Ethereum long positions held by Bitfinex whales are rising sharply. This increase in long exposure contrasts with the broader trend of cooling activity among large holders.
Exchange flow data from Santiment highlights significant movement of assets. Approximately 169,000 ETH left exchanges on a net basis in a single period. This outflow represents the largest daily movement in more than four months. Specifically, on June 5, roughly 223,800 ETH moved from exchanges to external wallets.
On that same day, June 5, ETH reached its lowest price since the beginning of April 2025. In the days following this significant outflow, the price of Ethereum climbed rapidly. The combination of rising whale longs and substantial exchange outflows may create conditions for a supply squeeze, according to market observers.
ETH/BTC Ratio Resembles 2021 Setup
The relative performance of Ethereum against Bitcoin is also drawing attention. The ETH/BTC ratio is currently forming higher highs and retesting its trendline. This pattern resembles the setup observed before the altseason in 2021. While historical patterns do not guarantee future results, the similarity has prompted renewed interest in whether a breakout in the ratio is possible.
The interplay between the fading deflationary narrative and aggressive whale positioning creates a complex market environment. Investors are monitoring whether the recent exchange outflows and long builds translate into sustained price strength, particularly as the gap between Ethereum and Bitcoin’s supply growth narrows.
Why It Matters
Ethereum's supply growth now slightly exceeds Bitcoin's, challenging the narrative of ETH as a deflationary asset. For holders and traders, the shift in burn mechanics changes the fundamental value proposition. Meanwhile, significant outflows from exchanges and rising whale longs suggest potential supply constraints that could influence short-term price dynamics and market sentiment.
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