Ether Burning at Record Low Levels Since Merge, Ethereum Remains Deflationary
Ether burning has reached its lowest levels since the Merge, according to recent analysis. Ethereum is expected to remain deflationary for the time being. CryptoQuant’s data researchers have noted that the Dencun upgrade has once again made ether inflationary, potentially stripping it of its status as “ultra-sound” money.
The transition from proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism during the Merge has resulted in a significant decrease in ether burning. CryptoQuant’s report, released on Wednesday, attributes this to the reduced transaction fees on the Ethereum network following the Dencun upgrade.
The report reveals that the daily growth rate of ether supply is currently at its highest since the Merge. Prior to the Dencun upgrade, there was a shortage of Ethereum due to increased network usage, resulting in higher fees being burned. However, the experts at CryptoQuant believe that the total number of fees burned has become independent of network activity after the Dencun upgrade.
Based on the analysis, Ethereum is expected to remain deflationary for now, considering the current pace of network activity. It also suggests that the perception of Ethereum as “ultra-sound” money may have diminished or would require a significant increase in network activity to be revived.
The Dencun upgrade took place on March 13, 2024, enabling more efficient data storage in “blobs” on the Ethereum network and reducing prices for Layer 2 transactions.
In the broader cryptocurrency market, many cryptocurrencies continue to experience downward trends. Ethereum (ETH), the largest altcoin by market size, has seen a 19% decline in the past 30 days, following a month of bullish price action.
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