Supply of ethereum (ETH) fell in January, resulting in a net deflationary value of $16 million.
ETH Net Deflationary Value Drops To $16 Million
According to the ultrasound money report, the total supply of ETH is 120,515,722, with an annual rate of decline of 0.012%. This shift in cryptocurrency supply and demand dynamics is significant, as it suggests a trend toward greater scarcity and potentially higher market value in the future.
The impact of this change on the Ethereum market and its stakeholders is worth paying attention to for anyone interested in the cryptocurrency industry.
Burning of ETH base fees results in a net decrease in supply
On September 15, 2022, the Ethereum network underwent a significant change with the completion of the Merger. This transition moved Ethereum from proof-of-work (PoW) to proof-of-stake (PoS), bringing several benefits to the network. However, the merge has since reduced power consumption by nearly 100%, paving the way for sharding to improve Ether’s scalability in a future hard fork.
According to EtherealOn the PoW blog, the previous PoW system gave miners around 13,000 ETH in daily block mining rewards, but after the merger, participants receive only around 1,700 ETH in daily tips, resulting in a 87% reduction in emission.
Base rate burning allows for a net daily reduction in supply based on grid usage. The busier the network, the more base fees are burned. For base fees burned to exceed 1,700 ETH and result in a net decrease in supply, the network must have a minimum activity of 16 Gwei per day. The periods of supply inflation currently exceed those of supply deflation.
The graph above shows the issuance of net supply, which is initially inflationary. According to the chart, the supply issuance after the Merger until November 9 peaked at 15,000 tokens in early October.
From November 10 to December 12, net supply issuance temporarily turned deflationary before turning inflationary again, but then returned to negative net supply issuance beginning on December 12, hitting a new low of -11,000 tokens on December 19.
Analysis of the current price of Ethereum
At press time, the price of Ethereum is trading at $1,576.37, with a 24-hour trading volume of $7,043,677,968. In the last 7 days, Ethereum has seen a new price increase of 1.2401417646805257%. With a circulating supply of 120 million ETH, Ethereum’s market capitalization is valued at $190,069,328,853.
ETH price has broken out of the 50-day and 200-day moving averages. The market price is in a short reversal move from the resistance level at $1668. If the price breaks above the resistance, the move higher will be inevitable.
