Thousands of digital assets have been launched over the years, and thousands will bite the dust over the next decade. Irrespective of that, Bitcoin and Ethereum are here to stay and develop, but a majority of the evolving is currently being manifested by the latter asset.
Since the London hard fork, Ether’s tokenomics has changed for good, with the current burn protocol in place. The high transaction fee issues still persist, as highlighted by bitinfocharts, where the average fee is worth over $50.
However, it is important to analyze the cumulative effect of network change and how it can lead to potential price movements.
Ethereum, a limited supply asset now?
According to CryptoQuant, the Ethereum supply rate of change has approached a zero value since the London hard fork. This means that the circulating supply of Ethereum is no longer increasing. This is currently in line with the supply and demand dynamics that were expected after the launch of EIP 1559.
Now, the price of Ethereum is obviously hasn’t registered any explosive behavior other than consistency reaching a new ATH but the schematics will change drastically, when the demand increases for the token.
Now, Santiment suggested that the amount of social volumes, trading activity, and active addresses have been on the rise but on-chain is suggestive of bearish correction anytime soon. The profit / loss realized by the network continued to decline as prices continued to rise in the charts, which is structurally not a good sign but the market continued to advance.
Yet, is deflationary effect permanent
Now, the main thing to understand with Ethereum’s limited circulating supply is that the completion of the Merge is eventually going to improve the demand perspective. While ETH miners continually generate more revenue at the time of publication, after the merger the miners will be shut down as they are expected to move from mining to validation.
For validator node operators actively running software on ETH 2.0 today, their estimated annual percentage return (APR) for a single 32 ETH deposit is between 6% and 7%. That might not be lucrative enough for some miners.
So, right now, with the ETH network being network discovery, the transition is unlikely to be smooth, but it is a step in the direction of deflation.
