Ethereum at highest level since cryptocurrency exchange FTX crash, deflation is back

Ethereum at highest level since cryptocurrency exchange FTX crash, deflation is back

In recent days, we have mainly paid attention to bitcoin and some smaller altcoins, which have risen by tens of percent. But Ethereum also continues to develop well.

Good rise on Ethereum

The current price of Ethereum is 1446.29 euros, in the last 24 hours the price of Ethereum has increased by 2.89%, or the value has increased by 41.77 euros. There are currently 121 million ETH in circulation with a market cap of €174 billion.

Since November 8, 2022, the price of Ethereum is no longer that high. With today’s gains, the market has erased the price drop caused by the FTX crash. Since January 1, Ethereum is up 31%, slightly better than Bitcoin (28%).

If we look at the Ethereum blockchain data, we already see improvement throughout 2022. According to the Ultrasound Money website, Ethereum is in deflation. Now it must be said that the terms inflation and deflation have taken on their own meaning in the crypto world for marketing reasons.

Ethereum has no inflation, it has deflation

This means that the supply of Ethereum does not grow, but decreases. Instead of adding new ethers in 2023, supply is down 0.09% year-over-year.

How is this possible? A small transaction fee must be paid for each crypto transaction. This applies to Bitcoin and certainly also to Ethereum. Transaction fees are actually a fee for miners, but Ethereum has had no miners since last year. As a result, it was decided to burn (write off) some of these transaction costs.

Apparently, more ETH is expected to be burned than added in the coming year. In theory, this is good for the price because it makes the coin more scarce.

The burn rate of Ethereum today is about 732,000 ETH per year. Emissions are about 622,000 ETH per year, which means more is being destroyed than produced. At the current price of Ethereum, that is 160 million euros.

At the moment, the network is relatively quiet in terms of the number of transactions. As more transactions are made and transaction costs rise, this has a greater impact on the burn rate. The result is further deflation and an accelerated supply contraction, which is very optimistic in the long run.

Is Shanghai good or bad for the price of Ethereum?

In March 2023, Ethereum faces a major upgrade called Shanghai. One of the most significant changes is that all nodes that have staked Ether before the merger on September 15, 2022 will be able to withdraw their coins.

It’s hard to put a good word for it, but the bottom line is that nodes that have ether tied to the Beacon Chain can free up their ETH to do whatever they want.

Launched in December 2020, Beacon Chain allowed users to place their ether into smart contracts, for which they were rewarded with interest. At this point, it is unclear when users will be able to withdraw this interest and staked coins from the smart contract.

This now appears to be March 2023 when Shanghai is unveiled. On the one hand, this is optimistic because it shows once again that Ethereum is a good piece of programming and that The Merge is a success. On the other hand, 16 million ethers are waiting on the sidelines, theoretically all to be sold on the open market.

Source: Btc Direct

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