In 2023, the number of active ERC-20 addresses on the Ethereum blockchain has shown little change. The count has been fluctuating between 200,000 and 300,000, even as Ethereum prices struggle to rise above their July 2023 peaks. As of August 2, there were approximately 275,000 active ERC-20 addresses, a modest increase from the 156,000 recorded on June 18. The overall activity level has remained low, except for a notable surge on June 11, when the number of active ERC-20 addresses surpassed 446,000. A careful examination of the price trajectory of Ethereum reveals a correlation with this activity pattern. Despite showing bullish tendencies over the past two months, Ethereum has failed to breach the critical liquidation level of $2,100, now hovering around the $1,800 range. The current candlestick arrangements in the daily chart suggest a looming drop. A decline below the $1,800 level may signal a transition from bullish to bearish in the medium term.
The stagnant number of active ERC-20 addresses and the decreased demand for Ethereum have significant implications for gas fees, which are used to pay transaction fees. When there is less competition for block space, gas fees tend to decrease, thus encouraging more participation in decentralized finance (DeFi) activities and the deployment of complex contracts. However, the current scenario sees less demand for Ethereum, resulting in lower gas fees and reduced competition. This dwindling interest in DeFi projects is reflected in the total value locked (TVL), which remains below $50 billion as of August 2. Many of these assets are tied to Ethereum, making it evident that DeFi projects like LidoDAO, Curve, and Uniswap primarily facilitate the trading of ERC-20 tokens. Among the various tokens, USDT stands out as the most actively transacted token, given its position as the third-largest coin by market cap. With considerable circulation in both Ethereum and Tron networks, this trend is expected.
The decline in activity on the Ethereum network can be attributed to the waning interest in DeFi activities. Throughout June and July, despite temporary price increases, on-chain ERC-20 transactions remained relatively stable. Ethereum prices exhibited an upward trend, rising from $1,630 to $2,000 during this period. However, the subsequent decline in prices may have led token holders to adopt a wait-and-see approach, resulting in reduced activity. This decreased activity level has undermined the deflationary effects enforced by Ethereum Improvement Proposal (EIP) 1559. While low network activity usually leads to a reduction in the number of coins taken out of circulation, the protocol continues to issue 2 ETH after each validated block, maintaining an inflationary pressure.
The declining demand for Ethereum and the stagnation of active ERC-20 addresses raise questions about the future of the platform. Will there be a revival in activity as prices continue to drop, or is this a sign of a long-term shift away from DeFi? The answer remains uncertain. Lower prices may encourage token holders to adopt a more cautious approach, resulting in decreased activity. However, it is important to note that the cryptocurrency market is dynamic, and trends can change rapidly. As Ethereum and DeFi projects evolve, new innovations and developments may emerge, reigniting interest and driving demand. Only time will tell whether this temporary lull in activity is indicative of a larger trend or simply a momentary setback.
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