As network activity has significantly increased, the quantity of Ethereum is steadily declining. Due to a recent upgrade known as EIP-1559, Ethereum, the second-largest cryptocurrency by market cap, has been a deflationary asset since mid-January.
$48,800,000 in Ethereum Has Now Burned As Second-Largest Crypto Asset Becomes Deflationary
In a recent development, the burning feature added in the Merge update resulted in the destruction of nearly 30,000 ETH on the Ethereum network. The increased network activity caused the burn rate to surge to new highs.
Since the upgrade, a portion of the transaction fee is permanently subtracted from Ethereum’s available supply for each sent ETH transaction.
This implies that the asset may become rare the more interest, adoption, and trading volume the Ethereum network experiences. The result so far this year, as tracked by Ultrasound.Money, is that the overall supply of ETH is now in reverse.
Source: Ultrasound.Money
The widely awaited Merge update for Ethereum was designed to convert the network from a proof-of-work to a proof-of-stake consensus mechanism. Faster transaction processing times and lower transaction costs were two advantages of this update. The entire quantity of the token was decreased by introducing a novel burning mechanism that permanently withdrew ETH from circulation.
The recent increase in burn rate is a sign that the Ethereum network is doing well. It means that the new burning mechanism is operating as expected, and the transition to the new consensus method is going well.
Source: Ultrasound.Money
The advent of Layer 2 networks, which allow for quicker and less expensive transactions on the Ethereum network, and the resurgence of the DeFi business, which has been a major factor in Ethereum’s growth in recent years, are the two biggest drivers to the increased network activity. Also boosting network activity is the general rise in risk tolerance among individual investors, which has raised the demand for Ethereum.
ETH/USD 4-hour chart | Source: TradingView
Although the burning process is intended to decrease the overall supply of ETH, it is crucial to remember that it does not ensure price growth. Market demand and investor sentiment ultimately influence the price of ETH. Following a price recovery a few days ago that took ETH back over the November level, Ethereum is currently trading at $1,694.
Then, Ethereum programmers will concentrate on brand-new functions like sharding and zero-knowledge proofs. Sharding will essentially enable parallel processing on the network, considerably boosting the scalability of the blockchain. Zero-knowledge proofs let users approve transactions without disclosing any personally identifiable information intended to enhance privacy.
Ethereum price could surge soon, citing its low volatility as a possible indicator
Crypto expert Mohit Sorout, co-founder of Bitazu Capital, believes that a significant increase in the price of ETH is about to occur. In a recent tweet, Sorout asserted that the cryptocurrency’s volatility has dropped to extremely low levels, opening the door for a price increase.
$ETH volatility experienced extreme lows.
For vol to mean-revert to higher levels, price will have to do the needful, no?Translation: Number go up more. https://t.co/nPYEvojROt
— Mohit Sorout 📈 (@singhsoro) February 19, 2023
Sorout argues that the price will need to increase for Ethereum’s volatility to mean-revert to greater levels. The market value of Ethereum is a staggering $207 billion. The past seven days have shown meandering price performance with swings between $1,500 and $1,700. But, Sorout’s extremely bullish forecast may indicate that a significant price increase is imminent.
The key to a wealth of opportunities is Ethereum. A spike in its value might impact the wider cryptocurrency market, bringing about waves of change. It should be no surprise that traders and investors will closely monitor Ethereum’s price changes over the next few weeks.
The “mother of all” positive signs, as described by Sorout, has recently flashed for Bitcoin, the most well-known cryptocurrency, according to the DCA indicator. Only three times in the cryptocurrency’s history has the DCA indicator flashed, but each of those flashes resulted in significant rallies.
Only four times in history has the DCA signal predicted a blazing bull market for Bitcoin, according to Sorout. The bellwether cryptocurrency still has a long way to go before reclaiming its prior all-time high of $69,000, so it is still uncertain how far this rise will go.
Read more:
- Ethereum Whales And Sharks Have Accumulated Enough ETH Recently To Help ETH Recover $1,700
- Ethereum Developers Prepare For Shanghai Launch And Agree To Ban Zero Blob Transactions
- Ethereum’s Available Coins On Exchanges Drop By 37% Since Merge, Despite Recent Price Decline