Drop in activity on Ethereum network to yearly lows increased inflation risks

As reported by Glassnode, on Sunday, the daily number of active addresses engaged in Ethereum transactions fell to 361,078, the lowest in more than a year. 

The plunge in activity suggests a decrease in the number of users and lower activity in the blockchain. This often results in a reduction of transaction fees, bringing down the amount of ETH burned and making the asset more inflationary. If this trend persists, investor confidence may decline, the network might lose popularity, and the price of ETH could fall, the organization's experts say.

In addition, the number of new users in the Ethereum network has also decreased. According to Glassnode estimates, on Sunday, the number of new wallets created for ETH trading totaled 86,539 addresses, which was the lowest since the beginning of the year. 

The decrease in the network participation has added to inflationary pressure on ETH, while its total circulating supply has surpassed 120 million. As fewer transactions and interactions take place on the blockchain, the lack of demand to absorb the growing supply is increasing downward pressure on the ETH price, Glassnode summarized.