The current recovery of the cryptocurrency market has helped the issuance of Ethereum (ETH) become deflationary for the first time in 2023. According to data from Ultrasound.money, the supply growth of ETH is roughly -0.10% annually. This is 622,000 ETH issued and 739,000 ETH burned annually.
There is currently about 32 less ETH than there was in circulation when the merge update happened last year, which changed the network consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS).
The release becomes deflationary again, months ahead of the long-awaited Shanghai update, which is expected to take place in March this year. This “hard fork” will include a series of updates that will improve the transaction speed, security, and efficiency of the ETH blockchain.
In addition, Shanghai will allow the withdrawal of ETH (“blocked”) tokens on the Beacon Chain. The update is the first of its kind since Staking launched in November 2020.
The Ethereum overlay, which includes locking in ETH tokens, gaining the opportunity to validate transactions, and receiving ETH as a reward, has increased as the price of ETH has risen. As explained by analyst Ekta Maurya, staking Ethereum has been seen as a popular way to take ETH tokens out of the circulating supply, thus reducing selling pressure on the exchanges. In parallel, property owners benefit from the returns and rewards of their holdings in the ETH2 deposit contract.
“When developers announced the opening of ETH tokens at Staking after the Shanghai hard fork, experts suspected that staking would lose popularity. However, staking activity has seen an increase,” the analyst said.
According to Maurya, the Total Staking (TVS) value of the collateral contract reached a new all-time high of 16,042,047 ETH tokens on January 1st. According to her, the increase in TVS offerings indicates that the ETH community is ready to lock more tokens and generate rewards ahead of the March 2023 unlock.
“At least 35,000 ETH will be unlocked after the $55.07 million Shanghai hard fork immediately after the upgrade. It remains to be seen how the opening event will affect the network of the largest altcoin in the market.
Ether price (ETH)
As mentioned, the price of Ether (ETH) has increased significantly in recent days, following the movement in the price of Bitcoin (BTC). Last week, the price of the second largest cryptocurrency in the market jumped just over 17%, according to data from CoinGecko. At the time of writing this article, the cost of ETH is R$7,871. In the last 24 hours, the price has increased by about 1%.
ETH price chart for the past seven days. Source: CoinGecko