Following Ethereum's DenCun upgrade on March 13, which drastically reduced transaction costs on the Layer 2 network, the cryptocurrency has transitioned from a deflationary to an inflationary trend. This significant upgrade, celebrated as one of the most impactful in Ethereum's history, has had unforeseen consequences for the network's economics.
With the decrease in user fees post-upgrade, the Ethereum network is now burning ETH at a much slower rate than before, leading to an increase in the circulating supply of ETH. CryptoQuant's recent report highlights this shift, indicating a rapid daily growth rate in ETH supply since the completion of the DenCun upgrade.
The supply of ETH
YCharts data confirms the gradual decline in ETH supply following the upgrade, with an uptick observed from April 13 onwards, bringing the total supply to 120 million coins. Notably, ultrason.money data reveals that Ethereum has burned 488,000 ETH in the last 30 days, lower than the newly issued 913,000 ETH, resulting in a positive inflation rate of 0.353%.
Since the merge in September 2022, Ethereum's consensus mechanism transitioned from Proof of Work to Proof of Stake, significantly reducing the issuance rate of new ETH. This change initially transformed ETH into a deflationary currency, earning it the moniker "Ultrasound money" in contrast to Bitcoin's "Sound Money" due to its fixed supply. However, with the recent increase in ETH supply outpacing burning, this advantage is dissipating.
Furthermore, CryptoQuant's analysis reveals a disconnect between transaction fees and network activity post-DenCun upgrade. Previously, transaction fees were positively correlated with network activity, leading to a reduction in ETH supply. However, despite increased network activity, transaction fees remain subdued, decoupling total burning costs from network activity.
The conclusion of the report is:
Given the current network activity speed, Ethereum is unlikely to experience deflation again, and the narrative of Ether as Ultrasound money may have vanished or requires higher network activity to revive.
In conclusion, Ethereum's transition to inflation post-DenCun upgrade suggests a departure from its previous deflationary narrative. The notion of Ether as "Ultrasound money" may need higher network activity to regain prominence or risk fading altogether amidst the current economic landscape.
The emergence of crypto has brought about significant changes across multiple industries, including gambling. But with perks like anonymity, faster transactions, and the likes, will crypto trading become a gambling addiction instead?
KikyoPoloniex hack: Attacker moves $53.5 million ETH through Tornado Cash. Funds remain untraceable. TRON founder pledges compensation. Recovery efforts ongoing amid challenges.
Xu LinAnalysts warn of challenges for Ethereum if SEC rejects spot ETH ETFs by May-end. Focus on upcoming decisions for VanEck and Hashdex ETFs. Concerns over ETHBTC ratio decline post-rejection. Inflationary worries persist amid Dencun upgrade. Competition from Solana noted. Uncertain impact on BTC and SOL markets.
EdmundEthereum whale profits from year-long investment, making strategic moves amid market fluctuations, capitalizing on short-term gains.
Xu LinSEC delays verdict on Galaxy Invesco's Ethereum ETF proposal, affecting other applicants. Analysts split on approval chances.
Huang BoA cybercriminal behind the embezzlement of $7.4 million from Hundred Finance reappears, moving approximately $800,000 worth of assets to launder or utilise the stolen funds. Despite a recent decline in crypto scams and hacking incidents, challenges persist in securing cryptocurrency platforms and preventing financial crime.
WeatherlyHong Kong's Bitcoin and Ether ETFs launch saw a modest trading volume, indicating cautious investor sentiment amid regulatory concerns and market volatility. Despite the muted response, increased trading volume suggests growing interest, hinting at potential future market impact.
WeatherlyHong Kong is launching Asia's first spot Bitcoin and Ether ETFs, potentially establishing itself as a crypto hub in the region, though mainland Chinese investors are currently restricted. The move could trigger a ripple effect across Asia, encouraging other regulators to explore similar initiatives, potentially reshaping the regional crypto investment landscape.
WeatherlyHong Kong's approval of bitcoin and ether ETFs signals its growing role in cryptocurrency innovation, contrasting with China's stricter stance. While this move promises investment opportunities and financial growth, it also poses risks due to cryptocurrency volatility and regulatory uncertainties.
AnaisSOLANA, ETH, deflation and Cancun upgrade push ETH to the forefront Golden Finance, how to profit from ETH deflation
JinseFinancePancakeSwap shifts to deflationary model, cutting CAKE supply by 40%
AlexCosmos DEX Osmosis has reduced token inflation by 50% with plans for fee sharing in OSMO 2.0 update.
OthersThe supply of the second-largest crypto asset Ethereum (ETH) is deflating, thanks to the success.
dailyhodlWhile the Merge is likely to cause a reduction in ether's supply, making it a deflationary asset, low network usage may delay the expected bullish effect.
CoindeskWith only a week to go before the Ethereum merger, how are key Ethereum metrics evolving? Is ETH still deflationary? What about staking returns?
CointelegraphWith another dramatic drop in the cryptocurrency market, many investors will be checking their portfolios nervously this week to see ...
BitcoinistCurrently, the Ethereum network burns more than $65 million worth of ETH per day.
CointelegraphAs inflation in the US becomes more than temporary, deflationary assets become essential to wealth creation.
CointelegraphThe AXIA native cryptocurrency becomes scarce as the activity or participation on the network increases.
Cointelegraph