The number of Ethereum being issued daily has drastically been cut since the Merge, on-chain data show, suggesting that the asset is on its way to becoming deflationary.
Update 29 Sept. 19:30: Currently the supply growth has increased slightly to 0.09% with a total of 14,042,583 ETH currently in the Ethereum staking contract, totaling $18.7B
Update 28 Sept. 13:30: Ethereum appears to be on the verge of moving over to a deflationary asset as the supply growth hits 0.01% per year. According to Ultra Sound Money, 1,608 ETH are being burned daily, or 1.12 ETH per minute.
According to data from Ultra Sound Money, Ethereum’s issuance rate has fallen by 98% since the Merge.
Since its transition, the network’s supply has grown by 7,385.47 ETH, whereas if it were still running on the Proof-of-Work (PoW) consensus model, it would have added 128,422.13 ETH.
Within the last 24 hours, ETH supply has been up by 0.34%. Under PoW, it would have been 3.86% over the same period.
Some have argued that the decline in token issuance is not just a result of the transition to PoS. They have attributed this change to reduced activity on the Ethereum network, which means gas fees are also lower.
But the network’s activity also declined before the Merge, and more ETH tokens were still issued under PoW.
Ethereum is not yet deflationary
However, Ethereum is not yet deflationary because the overall token issued is still higher than the token burned. Supply is still growing even though it is at a very slow pace.
In the past day, around 519 ETH were burnt. But the network issues around 772 ETH tokens daily.
BitMEX co-founder Arthur Hayes had said he does not believe Ethereum needs to become deflationary post-Merge. According to him, Ethereum’s goal of becoming a “decentralized computer” could be impacted if it sees a major price hike. He added that the focus should instead be on the reduction of Ethereum’s inflation post-merge.
The head of research at IntoTheBlock Lucas Outumoro predicted that ETH might be slightly inflationary after the merge if its demand remains low.
ETH price is performing poorly
Despite the sharp decrease in its issuance rate, Ethereum’s price continues to perform poorly. It is trading slightly above $1,300 after dropping 9.6% in the last seven days.
All the minor gains Ethereum recorded in the buildup to the Merge have now been lost. The last time ETH traded this low was in July after the crypto market crash.
Several analysts had predicted that the asset’s price performance would improve after the completion of the Merge. However, Ethereum’s price has mostly been negative since the transition, tanking by around 20% from the day of the merge.
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