Dencun Upgrade Backfires: Ethereum Supply Soars, Price Tumbles
Mustafa Mulla10 May 20241 min read
The latest report from crypto analytics firm CryptoQuant raises questions about Ethereum’s status as “ultra-sound money” following the mid-March Dencun Upgrade. Originally aimed at cutting fees and boosting network scalability, the upgrade has inadvertently made Ethereum more inflationary.
The Dencun Upgrade was supposed to make Ethereum transactions cheaper and the network more scalable. However, it unexpectedly slowed down the rate at which Ethereum is burned. This slowdown could push Ethereum’s price down to about $2,500.
Slowing ETH Burning
The report shows that transaction fees on Ethereum have dropped significantly, making them about four times lower than before the upgrade. While this might seem good for users, it’s led to less Ethereum being burned. Consequently, Ethereum’s supply has shot up quickly, going against the deflationary trend seen after the 2022 Merge.
After the merger in 2022, Ether experienced deflation, with the total supply dropping from 120.491 million to 120.097 million by September 2022. However, CryptoQuant’s report now indicates a change in this trend, with ETH supply jumping by 400,000 tokens since April.
Impact on Market: Ethereum’s Price and Sentiment
The Dencun Upgrade has not just affected Ethereum’s supply dynamics but also its price and market sentiment. Analysts note a significant historical breach in the ETH/BTC pair’s critical support level, often signaling substantial price corrections for Ethereum.
Feeling Bearish?
With Ethereum’s price hovering around $3,025, a bearish sentiment prevails in the market. Analysts predict further drops, especially if Ethereum’s price falls below 0.04 BTC, potentially bringing it to around $2,500. Currently, amidst ongoing market fluctuations, Ethereum has seen a modest 0.76% increase over the last 24 hours.
Will the Ethereum price hold or is a correction inevitable? Share your thoughts.
Also Check Out: CryptoQuant Report Identifies Absence of Whales in Bitcoin Uptrend Cycle
