Key Points
- Ethereum’s supply has become inflationary due to a decrease in user activity on the network.
- Despite recent market declines, Ethereum’s long-term outlook remains significantly bullish.
Ethereum’s supply has taken an inflationary turn as a result of a drop in user activity on the network over the last month.
Data from Ultrasound.money shows that the supply of this leading altcoin has risen by over 4,836 ETH in the past 30 days, with a growth of 9,000 ETH in the last week alone.
Ethereum’s Inflationary Turn
When an increase in the number of coins created and added to the circulating supply occurs, Ethereum’s supply is considered inflationary.
This can put downward pressure on the coin’s price, especially when the Ethereum network experiences a dip in user activity.
On-chain data from Artemis shows a decrease in the daily count of unique addresses interacting with the Ethereum blockchain over the past 30 days.
From 23rd March to 22nd April, the daily active address count for Ethereum fell by 22%, leading to a 15% drop in the network’s daily transaction count.
Long-term Bullish Outlook
Despite these recent challenges, Ethereum’s long-term outlook remains positive.
The 50-day moving average (MA) of Ethereum, which initiated a golden cross when the bull market rally began in October 2023, still lies above its 200-day MA on a weekly chart.
This indicates that the shorter-term moving average has stayed above the longer-term moving average, a sign generally viewed as bullish.
It suggests that Ethereum has seen a sustained price increase since October 2023, despite some setbacks.
Ethereum’s Directional Movement Index also confirms this bullish outlook.
The positive directional index (green) crossed above its negative directional index (red) in October 2023 and has maintained this position since.
This is seen as a bullish signal, indicating an increase in bullish momentum and a potential further price rally.
Ethereum’s Squeeze Momentum Indicator, which measures an asset’s momentum and tracks the market’s consolidation phase, has been showing green upward-facing bars since November 2023.
This suggests that Ethereum is experiencing upward momentum, and despite price declines in recent weeks, the rally is expected to continue in the long term.
Despite the bullish long-term outlook, a surge in profit-taking activity since mid-February has led to a decline in some key momentum metrics for Ethereum.
The Relative Strength Index (RSI) and Money Flow Index (MFI) were 58.77 and 52.01, respectively, at the time of writing.
These values, although above 50, indicate a slight decrease in buying pressure due to recent bearish market trends.
However, a combined reading of Ethereum’s RSI, MFI, and other indicators suggests that the coin is not in extreme overbought or oversold conditions and that the current trend may continue to be stable with a slight bullish bias.
In the derivatives market, Ethereum’s futures open interest reached a peak of $15 billion on 9th April and has since declined by 33%.
This decrease signals a drop in trading activity in Ethereum’s futures market, indicating that market participants are closing out their positions without opening new ones.
Since the decline in open interest began, Ethereum has closed five days with a negative funding rate, with the most recent being on 22nd April.
On these days, futures traders placed bets in favor of a decline in Ethereum’s value.
At the time of writing, Ethereum’s funding rate across exchanges was 0.0023%, showing that long traders have regained control.
