With a significant increase in network activity, the amount of Ethereum in circulation is decreasing. Ethereum, the second-largest cryptocurrency by market capitalization, has been a deflationary asset since mid-January due to the EIP-1559 upgrade.
$48.8 Million worth of Ethereum Has Now Been Burned
In a recent development, the burn feature added to the Ethereum network in the Merge upgrade resulted in nearly 30,000 ETH being removed from circulation. Increased network activity caused the burn rate to rise to new highs.
After the upgrade, for every ETH transaction sent, a portion of transaction fees will be permanently removed from Ethereum’s available supply.
This means that the asset may become rarer as there is more interest, adoption and transaction volume on the Ethereum network. According to year-to-date results tracked by Ultrasound.Money, the overall supply of ETH is currently decreasing.
The long-awaited Ethereum upgrade The Merge aims to transition the network from PoW to PoS. Faster transaction processing times and lower transaction costs are two advantages of this update. The total number of tokens has been reduced by introducing a new burning mechanism that permanently removes ETH from circulation.
The recent increase in the burn rate shows that the Ethereum network is doing well. This means the new burn mechanism is working as expected and the transition to the new consensus engine is well underway.
The emergence of Layer 2 networks, allowing for faster and cheaper transactions on the Ethereum network, and the revival of DeFi businesses, which have been the main factors behind Ethereum’s growth in recent years, are the two largest drivers of increased network activity. Additionally, driving the network activity is a general increase in risk tolerance among individual investors, which increases demand for Ethereum.
While burning is intended to reduce the overall supply of ETH, it is important to remember that this does not guarantee a price increase. Market demand and investor sentiment ultimately affect the price of ETH. Ethereum is currently trading at $1,709 after a price recovery a few days ago brought ETH back to November levels.
Mohit Sorout, a cryptocurrency expert and co-founder of Bitazu Capital, believes that the price of ETH is about to rise significantly. In a recent tweet, Sorout asserted that cryptocurrency volatility has dropped to extremely low levels, opening the door for an uptick.
$ ether Volatility has experienced extreme lows.
In order for volatility to return to higher levels, the price will have to do what is necessary, no?
Translation: The numbers go up even more. https://t.co/nPYEvojROt
— Mohit Sorout (@singhsoro) February 19, 2023
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according to Kyptos