New analysis questions whether Ethereum's Layer-2 scaling has quietly undermined the fee-burn mechanism that was meant to make ETH a deflationary, "ultrasound" money.

Under EIP-1559, a portion of every transaction fee is burned, removing ETH from circulation and, when activity is high, making the supply shrink. That design anchored the "ultrasound money" narrative, a bullish case that Ethereum would become more scarce than Bitcoin over time.

Layer-2 networks process the bulk of user activity off the main chain to cut costs, which reduces the base-layer fees that feed the burn. Analysts say the result is a weaker deflationary force than the thesis assumed, complicating the story for ETH's value accrual.

Markets are also bracing for developments around the CLARITY Act, U.S. legislation that would clarify which regulator oversees digital assets. ETH bulls are defending key support levels as policy uncertainty weighs on sentiment.

Supporters counter that Layer-2s still return value to Ethereum through data-availability fees and by securing the base layer, even if less ETH is burned. They argue the network's role as settlement and security provider remains intact as activity scales.

The debate matters because narrative drives capital. Whether Ethereum is judged as ultrasound money or as utility rails will shape how investors price it as regulators finalize the rules for the next phase of the market.

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