Ethereum Deflation Hits Record High Six Months After Merger, What This Means For ETH

Ethereum breaks record

Regardless Ethereum’s strange price action Over the past few days, the second largest crypto by market capitalization has been breaking records behind the scenes. In accordance Ultrasound moneyETH supply deflation has recently reached an all-time high as the total ETH supply has fallen by almost 1% in the last 30 days.

This drop in supply comes at a time when the ETH price has fallen in recent weeks and is currently showing a bullish trend. Over the past three days, ETH has gained nearly 10% after surviving heavy losses from the previous week.

Deflation Increases as Ethereum Supply Plunges

Arguably, Ethereum’s transition to a proof-of-stake consensus has been a boon for the network. Not only has it positively impacted the asset’s supply, but it has also been beneficial to the network’s overall growth.

According to data from Ultrasound.money, it is Ethereum network is currently increasing to be deflationary as the network supply has fallen by 63,287 ETH at the time of writing since the merge took place last September.

With Ethereum’s current supply at 120.457 million, the ETH burn rate has moved to 1,219,000 and its supply has also plunged by 0.44% in the last 30 days. This proves that the asset can only continue to decrease in supply over time and eventually become deflationary.

As estimated by Ultrasound.money, the Ethereum supply will reach 117 million by the year 2025. Issue rewards for stakers are expected to be about 4% per year, surpassing the burn rate for non-stakers, which is around 1.8% per year.

Meanwhile, most of the burn in ETH resulting in a declining supply can be attributed to ETH transfer from major DeFi applications, including Uniswap, Tether, and the recently hyped Blur airdrop that triggered a spike in Ethereum network activity.

Overall, constant record deflation and a continuous drop in Ethereum supply could eventually see the ETH price valued much higher than it is now, especially as demand continues to increase given the network’s dominance in DeFi and NFT ecosystem.

ETH’s continuous rally

The ETH price has risen by nearly 15% over the past couple of days, and at the time of writing, the rally does not appear to be slowing down anytime soon as the asset has broken above $1,700 to trade at $1,741. The asset’s price is now up 8% in the last 24 hours.

In contrast, ETH’s trading volume has also indicated heavy buying pressure as the asset’s volume rose from $8.6 billion on Monday to $15.9 billion over the past 24 hours. Ethereum’s market cap has increased by more than $20 billion over the same period.

Meanwhile, Ethereum is still down 64% from its all-time high of $4,891 seen in November 2021 despite the ongoing rally. With Ethereum Shanghai upgrade drawing right in the middle of a bullish cyclechances are high that ETH could see a rebound near the top or beyond.

Featured image from Unsplash, chart from TradingView