Ethereum supply falls by 55K ETH in 5 days
Ether has shown clear signs of deflation in recent days
From October 8, 2022, the total supply of Ethereum cryptocurrency has decreased by as much as 5.5 thousand ETH coins. The change of the consensus mechanism to PoS has led to the fact that Ether can no longer be mined, as a result of which the amount of this cryptocurrency reaching the market is much smaller than it used to be. After the developers implement a significant EIP-1559 update, part of the ETH is also burned with each transaction. Over the past few days, the supply of Ethereum in the market has contracted significantly, temporarily making it deflationary.
Potential reasons behind the sharp decline in Ethereum supply
Digital currency market analysts have recently observed a reduction in the supply of the second largest virtual currency in the last 5 days. On the basis of the collected data, they concluded that this cryptocurrency, at least for some time, changed its character to deflationary.
As part of The Merge update in mid-September this year, the Ethereum project abandoned the extremely energy-intensive PoW consensus-building mechanism for PoS. Due to the fact that ETH tokens are no longer mined by miners, they enter the market every day in much smaller quantities than before.
An additional factor influencing the reduction of the ETH supply is also the burning of a part of this cryptocurrency with each transaction made. This is the result of an update on the Ethereum network called EIP-1559, which took place in 2021.
As of October 8, 2022, the supply of ETH has decreased by approximately 5,500 ETH coins. According to the calculations published by the Ethereum Foundation, the price of gas in this network would have to remain around 15 gwei for this digital currency to become deflationary. This is exactly what happened in the last few days.
ETH on the red - what does it mean for the future of the cryptocurrency?
The second oldest cryptocurrency is following in the footsteps of Bitcoin, which has already lost over 7% of its value in the last 7 days. Ether at the same time became cheaper by nearly 9%. Currently, the exchange rate of this digital currency is around 1.2 thousand dollars for one coin. ETH thus deviates from its ATH in the amount of 4.8 thousand dollars by as much as about 74%
