Ethereum, the largest altcoin by market value, is facing unexpected inflationary trends and legal challenges, despite its dominant position in the Web3 world. The Ethereum network, home to numerous popular protocols, has seen a resurgence of inflation after the Dencun upgrade, contradicting expectations of a deflationary trajectory post-Merge.

The Dencun upgrade marked a turning point, as the circulating supply of ETH began to increase, ending the brief period of deflation. According to CryptoQuant data, the circulating supply rose from 120 million to 120.1 million after the upgrade, signaling the start of an inflationary phase. This development has led to concerns about Ethereum's future, as it strays from the "ultrasound money" narrative.

In addition to inflation, Ethereum is facing legal challenges, with the SEC targeting entities like the Ethereum Foundation, Uniswap, ConsenSys, and Robinhood. While falling transaction fees are a positive development, they have contributed to inflation, as the burned fees no longer cover the rewards. To reverse this trend, a significant increase in transaction volume is necessary. If achieved, a reasonable supply increase may not harm the price. However, the deflation narrative, which once motivated bulls, is no longer a driving force.