Ethereum: Under Inflation Pressure Despite Burn Mechanism

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by Giorgi Kostiuk

2 years ago

Made with AI

  1. 18,171 ETH Minted Against 1,757 ETH Burned
  2. Current State of Ethereum
  3. Conclusion


    4. According to the data provided by Ultrasound.money, Ethereum (ETH) is under inflation pressure. Ethereum’s net supply increased by 16,414 ETH in the last 7 days.

    18,171 ETH Minted Against 1,757 ETH Burned

    Data shows that Ethereum’s supply increased by 18,171 ETH in the last seven days. During this period, 1,757 ETH were burned through the coin burn mechanism, resulting in a net supply increase of 16,414 ETH.

    The latest figures from Ultrasound.money indicate a significant net supply increase for Ethereum despite the coin burn mechanism implemented with the London update, particularly the EIP-1559 update. Introduced in August 2021, this mechanism aims to make the Ethereum network deflationary by burning a portion of transaction fees, thereby reducing the total supply. However, the current net supply increase shows that new ETH issuance currently outpaces the amount of coins being burned. For ETH burns to accelerate and the network to become deflationary again, network usage needs to increase.

    Current State of Ethereum

    At the time of writing, Ethereum’s main network asset ETH is trading at $2,412, up 0.15% in the last 24 hours. Note that the price of the 'altcoin king' has fallen by 4.90% in the last 7 days. Market observers and analysts state that the psychological threshold of $3,000 must be surpassed for the price to enter an upward trend again.

    Moreover, Ethereum’s supply dynamics are extremely important for the trajectory of ETH’s price. Ongoing changes in supply and the coin burn rate are among the key factors that can affect ETH’s scarcity and consequently its market price.

    Conclusion

    Despite the implementation of the coin burn mechanism, Ethereum continues to face inflationary pressure. To make the network deflationary, Ethereum's usage needs to increase, which will deepen coin burns and diminish the total ETH supply. The supply dynamics and burn rate remain crucial factors affecting ETH's price and scarcity.

    Thus, despite the existing burn mechanism, Ethereum continues to face inflationary pressures, requiring more active network usage to achieve deflationary goals.

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