Recent market dynamics have brought again Ethereum Supply in the spotlight and reiterated concerns about its inflationary tendency. Earlier this year, Ethereum reached a significant milestone in its circulating supply, surpassing 120 million ETH and the number continues to grow.
Unlike other prominent cryptocurrencies such as Bitcoin and Cardano, which have fixed supply limits, Ethereum was designed with an unlimited supply of tokens. This fundamental difference makes Ethereum a inherently inflationary valuet, one that has a continually increasing supply.
On the net data from Ultrasound.money has shed light on the growing supply of ETH in recent months amid notable price fluctuations for cryptocurrency. The latest data indicates that the total supply of Ethereum has now reached approximately 120.28 million ETH.
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In the last seven days alone, 16,039 new ETH tokens were minted. This issuance rate corresponds to an annual inflation rate of 0.70%. Interestingly, this data shows that 243,886 ETH were minted in the last four months since the Dencan update in March.
What does this mean for Ethereum?
Ethereum’s inflationary mechanism is primarily counteracted by token burning. This burning mechanism was introduced as part of Ethereum’s London Hard Fork in order to introduce a deflationary mechanism to Ethereum. This mechanism aims to reduce the overall supply of ETH by burning a portion of the transaction fees, thus introducing a deflationary counterbalance.
However, data from Ultrasound.money shows that burns are currently lagging behind issuance, and Ethereum is now on an inflationary trajectory. Notably, 2,028 ETH were burned in the past seven days, compared to 18,075 ETH issued in the same period. A sustained upward trend in supply growth could put downward pressure on the price of ETH in the event of a drop in demand.
At the time of writing, Ethereum was trading at $2,615, with no significant gains or losses over a 24-hour period. Looking at the broader seven-day price action, it shows that Ethereum was largely trading within a range of $2,750 on the upper end and $2,530 on the lower end. The latest price action has seen Ethereum rebound to $2,540 in the last 12 hours. If this continues, Ethereum could possibly push up and retest $2,750 in the next few hours.
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According to the latest issues of Greeks.live, approximately 184,000 ETH options are set to expire today. These options represent a substantial face value of $470 million and are characterized by a put-call ratio of 0.8 and a maximum pain point of $2,650. This high put-call ratio value means that market participants are currently buying more put options than calls, which in turn suggests a bearish sentiment.
Image depicted from Dall-E, chart from Tradingview.com