Ethereum's deflationary advantage over Bitcoin is narrowing. Since the network merge, 55.4% of newly issued ETH has been burned, but that rate dropped significantly to just 2.7% over the last thirty days. With ETH's yearly supply growth now at 0.86%—nearly matching Bitcoin's 0.82%—the asset's scarcity narrative is being challenged.
The shift raises questions about what could drive Ethereum's next price leg higher. As gas fees have declined from 2.76 Gwei to 0.03 Gwei in two days, demand for Ethereum's Layer 1 block space has become critical. Lower transaction costs signal weaker immediate demand, but if activity remains robust despite cheaper fees, it could indicate sustainable adoption at lower cost.
On-chain metrics suggest Ethereum remains active. Velocity stands at 11.03, reflecting regular token circulation on the blockchain. Active addresses have reached 627k, pointing to growing network engagement. A sustained user base operating at lower fees could maintain transaction volume while reducing costs.
Whale positioning shows mixed signals. While overall whale activity is cooling, Bitfinex's ETH long positions are rising sharply, suggesting institutional capital is positioning for further gains. The ETH/BTC trading pair is forming a pattern similar to its 2021 pre-altseason setup, with higher highs and trendline retests.
Exchange flows add another data point. Approximately 169k ETH left exchanges on a net basis in a recent period—the largest daily outflow in more than four months. A comparable outflow of roughly 223,800 ETH occurred on June 5th, when ETH reached its lowest price since early April 2025, before recovering in subsequent days.
The combination of rising whale longs, significant exchange outflows, and sustained Layer 1 network activity creates conditions for a potential supply squeeze. Should market sentiment shift toward risk-on positioning, these factors could support an ETH/BTC breakout similar to patterns observed before the 2021 altseason.
