ethereum supply has seen an unusual surge in the space of a month, raising concerns about the cryptocurrency’s inflation risk among eth investors and community members.
ethereum inflation crisis
From the beginning of 2023, eth/ethereum-price-vulnerable-1665/” rel=”nofollow noopener” target=”_blank”>ethereum, the world’s second largest cryptocurrency has experienced fluctuating inflation rates in the eth money supply. According to the Ultrasound Money website, there has been a significant increase in eth supply over the last 30 days.
The global supply of eth has it shot itself at nearly 30,000 eth, raising concerns about the potential for inflation in the ethereum ecosystem and leaving the crypto community speculating about the reason behind this unexpected surge and how it would affect the ecosystem.
<img decoding="async" fetchpriority="high" class="alignnone size-medium wp-image-259000 aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Ethereum-Raises-Inflation-Concerns-as-New-Supply-Surge-in-Just.png" alt="ethereum eth Supply Inflation” width=”640″ height=”339″ srcset=”https://technicalterrence.com/wp-content/uploads/2023/10/Ethereum-Raises-Inflation-Concerns-as-New-Supply-Surge-in-Just.png 640w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-09-at-13.20.35-980×519.png 980w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-09-at-13.20.35-768×407.png 768w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-09-at-13.20.35-1536×813.png 1536w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-09-at-13.20.35-2048×1084.png 2048w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-09-at-13.20.35-750×397.png 750w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-09-at-13.20.35-1140×603.png 1140w” sizes=”(max-width: 640px) 100vw, 640px”/>
Almost 30,000 eth flows into circulation | Source: Ultrasound Money
The abrupt rise in global eth circulation is reportedly attributed to a ethereum/ethereum-daily-users-plunge/” rel=”nofollow noopener” target=”_blank”>drop in user activities and transactions on the ethereum network. Decentralized finance (DeFi) activities in the eth ecosystem have declined significantly and nft asset and meme coin transactions have also failed to recover, leading to a massive drop in eth gas fees this month.
Last month, eth transaction fees declined to 2022 lows, revealing a considerable decline in on-chain activities in the ethereum ecosystem. The average eth gas price is currently 31.62% lower than the previous year. Data of ethereum%20Average%20Gas%20Price%20is,31.62%%20from%20one%20year%20ago.” rel=”nofollow noopener” target=”_blank”>Y Charts shows that gas fees for the cryptocurrency have decreased from 13.49 gwei to 8.8 gwei on Sunday.
With significantly lower gas fees, less eth is unintentionally burned, leading to a significant swing in ethereum. supply dynamics and increase the potential for inflation.
He fare burning mechanism introduced by the ethereum ecosystem in 2021 acts as a deflationary force on the supply of eth. When ethereum gas rates are low, eth burns decrease, leading to an increase in eth supply and potential for inflation.
<img decoding="async" class="aligncenter size-medium" src="https://technicalterrence.com/wp-content/uploads/2023/10/Ethereum-Raises-Inflation-Concerns-as-New-Supply-Surge-in-Just" alt="Tradingview.com ethereum Price Chart” width=”2804″ height=”1746″/>
eth price falls below $1,600 | Source: ETHUSD on Tradingview.com
Inflation Concerns and Future Implications
The broader crypto community has had high hopes for the ethereum network since its merger, taking it from proof-of-work (PoW) to proof-of-stake. ethereum/crypto-research-claims-ethereum-pos-unsustainable-vitalik-hits-back/” rel=”nofollow noopener” target=”_blank”>(PoS) mechanism last year. Under the PoS consensus, energy-intensive mining processes are eliminated and validators are selected to create blocks and validate transactions on the network, thereby reducing the issuance of new eth and effectively managing the supply.
However, recent developments in eth supply have been less than positive and the high inflation potential It may have several implications for the ethereum ecosystem.
Over time, rising inflation can erode the purchasing power of eth, dramatically reducing the value of investors’ assets. Conflict over inflation rates and supply dynamics may also affect the crypto community, leading to unnecessary debates. There is also the possibility of interference from ethereum/ethereum-denied-non-security-status-in-latest-court-battle-against-sec/” rel=”nofollow noopener” target=”_blank”>regulatory authorities to protect investors against possible risks and losses.
ethereum‘s recent inflationary trend is a major concern for its investors and the cryptocurrency market in general. The crypto community is still monitoring the progress and measures taken by eth core developers to curb inflation risks.
ethereum developers have reportedly remained indifferent to the changes in supply, categorizing the recent increase as “insignificant” compared to the “grand scheme of things.”