Ethereum
Ethereum’s ‘Ultra-Sound Money’ Dream: Meeting Some Obstacles
When Justin Drake of Ethereum (ETH-USD) threw “ultra-sound money” into the crypto-verse in September 2020, he wasn’t just spinning words. It set the stage for Ethereum to potentially outperform Bitcoin (BTC-USD) in the game of financial stability. The idea? Making Ethereum so effective against inflation that it will not only retain its value but will see its supply diminish over time. Fast forward to The Merge in September 2022, and things have improved. Ethereum’s ETH supply increased from 120.491 million to 120.097 million, a subtle nod to these deflationary dreams.
Post-merger: deflationary pleasure or dilemma?
On-chain analytics company CryptoQuant has done a fantastic in-depth data analysis on Ethereum’s supply before and after Dencun, one of the best on-chain reviews the crypto space has seen in a long time.
Ethereum’s move to proof-of-stake during The Merge functioned as a direct path to “ultrasonic” glory. The total supply of ETH began to decline, fueled by more transaction fees burned than new ETH created. It was all cheers and champagne…until it wasn’t. It turns out that this decline was more due to high fees during peak trading periods than a consistent deflationary trend. And just when Ethereum enthusiasts started to feel comfortable, the Dencun upgrade came along and put a damper on the works.
The Double-Edged Sword of Dencun
Before Dencun, high network activity meant increased transaction fees, which was ideal for keeping the supply of ETH low. But after the upgrade? That old connection between bustling blockchain action and hot fees has just… evaporated. Today, even with the network humming, fees – and therefore expenses – are falling. Result? The supply of ETH is no longer decreasing. It’s growing. Again. And at a rate not seen since the pre-merger days.
Conclusion: Is “ultra-healthy money” still on the agenda?
Here’s the thing: Ethereum’s current path might just turn the whole “ultra-sound money” narrative into a nice idea that never really came to fruition. Of course, the initial post-merger phase gave us a glimpse of what could be. But with the Dencun upgrade recalibrating how fees work, Ethereum would need a large increase in network activity – or another smart adjustment – to get back on the deflationary path. Whether Ethereum can actually become an “ultra-sound currency” remains a big question mark.
Is Ethereum a Buy?
According to TipRanks Summary of technical indicatorsEthereum is a sale.
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