A little over a month after the Ethereum merger, one of the big changes investors have been waiting for has happened. Ethereum has become a deflationary asset. In crypto terms, this means that the supply of Ether is decreasing instead of increasing. However, while many investors hoped it would boost the price of cryptocurrencies (assuming no change in demand), no significant change has yet occurred.Basic supply and demand on the network. dynamics, the macro backdrop still has a strong influence on cryptocurrency prices. In theory, if we see a deflationary environment, there should be upward pressure on the price, but there are other factors that affect the price of Ether, said Oppenheimer analyst Owen Lau. . These tokens are still correlated with stock prices and the macro environment. He added that it could be reversed and digital assets could become inflationary again. Ether prices have fallen slightly since the post-merger sale in mid-September. As of Tuesday afternoon, it was down about 4% over the past month and remained flat on a month-to-date basis. If the amount of Ether burnt out on the network, or destroyed and permanently removed from circulation is greater than the amount created, the supply of Ether will decrease. According to data provider his Ultrasound Money, the write function is a rarity engine powered by Ethereums transaction utility. Gas or transaction fees skyrocketed last week as a result of increased traffic on the network. Ethereum uses these gas fees to burn tokens, so the higher the fees, the more money the network was able to burn. We don’t know when the Fed will pivot, we don’t know the next CPI number, but there are some network-specific things that could change the price, Lau said. If there are more use cases built on top of Ethereum, that too can support the ETH price, he added. If we have another big NFT launch or big sale, and we use ETH as a medium of exchange, we might see an increase in demand as well. Doesn’t seem to be listening…for anything other than the merge itself.” Staked Ether is increasing. At some point, this deflationary scenario could actually revert to inflation if the stake ratio gets high enough. However, high gas prices could drop at any time, meaning the network would burn less ether, Lau said. At some point, if we reduce ETH consumption and increase peoples stake at the same time, we will see the network cross another equilibrium and increase net supply, he said. It will be an inflationary asset This situation may not last forever.
