Key Points
- Ethereum’s (ETH) deflationary characteristics have changed due to the EIP-1559 upgrade, leading to an increase in total supply.
- The recent Ethereum upgrade has resulted in lower transaction fees, affecting the network’s fee burn rate and supply dynamics.
Ethereum’s label as “ultrasound money” has been altered due to the EIP-1559 upgrade. This change has impacted its deflationary nature by reducing the burn rate and slowing the removal of Ether from circulation.
The total amount of ETH has grown, with a noticeable increase in supply on exchanges. But how does this compare to the total supply?
Fluctuations in Ethereum’s Supply
Data from CryptoQuant shows significant changes in Ethereum’s total supply in recent months. Between November 2023 and early April 2024, ETH’s total supply dropped from over 120.2 million to around 120.06 million, decreasing by over 100,000 Ether.
However, starting from April 19th, the total supply began to rise again, reaching approximately 120.1 million at the time of the analysis. This increase is attributed to a decrease in fees burnt following the Dencum upgrade.
An analysis of the fees burnt metric shows a significant decrease starting in March. During this period, around 6,000 Ether were burnt in fees, a stark contrast to the current value of about 890 ETH. This reduction in fees burnt has led to an increase in Ethereum’s total supply, indicating a shift in its deflationary dynamics.
Impact of Recent Ethereum Upgrade
The recent Ethereum upgrade has led to a decrease in transaction fees on both the main network and its Layer 2 solutions. Data from Coin98 Analytics shows that Ethereum transaction fees have reached a yearly low, averaging 0.00017E or approximately $0.5 per transaction. This is a significant decrease compared to levels observed in February.
The overall fees generated on the Ethereum network have also seen a noticeable decline. At the time of writing, the total fees were around $3.6 million, a sharp contrast to the peak of approximately $7.8 million recorded in March. This downward trend in fees began about a month ago.
Analysis of Ethereum’s exchange supply shows an upward trend, with some interesting nuances. The increase in exchange supply began before the total supply started to rise, with the growth between March and press time amounting to over 3 million Ether. Despite this growth, the exchange supply remains relatively low compared to the total supply, suggesting a manageable risk of oversupply for Ethereum.
Furthermore, the relatively low exchange supply indicates that Ethereum’s current price is not under immediate threat from inflationary pressures.
Analysis of Ethereum’s price trend on the daily timeframe reflects a challenging period. After dropping below the $3,000 price level last week, ETH has struggled to regain its footing, trading at around $2,900 at the time of writing.
Both the Stochastic indicator and the Relative Strength Index (RSI) signal a negative price trend. However, these indicators suggest a potential price reversal in the near future, with ETH poised for a possible uptick.
