Checking Ethereum's reaction to Circle's $60M USDC burn

Circle, the company behind USDC, pulled $60 million worth of USDC from circulation on the Ethereum network.
Activity on the Ethereum network declined, the number of NFT trades on the network also fell.

Ethereum [ETH] witnessed a massive surge in interest over the last few days due to the hype around the Ethereum ETF.

USDC gets burned

Circle, a company that issues the USDC stablecoin, permanently removed $60 million worth of USDC from circulation. They did this on the Ethereum blockchain network.

Circle’s burning of USDC on Ethereum presents a double-edged sword for the network. On the positive side, fewer USDC tokens could translate to lower transaction fees and gas costs for all users due to potentially reduced network congestion.

This would be beneficial for everyone using the Ethereum network.

However, there’s a potential downside for DeFi applications on the Ethereum network. These applications rely heavily on USDC for liquidity and stability.

Burning USDC reduces the overall pool of USDC available, potentially making it harder for DeFi applications to function smoothly.

This could lead to reduced liquidity within these applications and increased volatility in DeFi markets, impacting users who rely on those services.

Source: X

Even though USDC is being burnt, other stablecoins such as DAI and USDT will not be impacted by Circle’s behavior and users’ interactions with other stablecoins will remain uninterrupted.

State of the network

In terms of the state of the Ethereum network, it was seen that the number of daily active addresses had declined significantly over the last few weeks.

Gas used on the Ethereum network also slightly declined. One of the reasons for the falling activity on the network would be the waning interest in Ethereum NFTs.

AMBCrypto’s analysis of Santiment’s data revealed that the number of NFT trades occurring on the network had plummeted.

Popular NFT collections on the Ethereum network such as BAYC (Bored Ape Yacht Club) and MAYC (Mutant Ape Yacht Club) witnessed a significant decline in the floor price and the volume of NFTs being traded on the network.

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Other networks such as Solana and Bitcoin were leading the way in terms of NFT growth.

If this trend continues, it could impact the overall Ethereum ecosystem negatively. At press time, ETH was trading at $3,730.06 and its price had declined by 1.83% in the last 24 hours.