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The possibility of Ethereum becoming deflationary after The Merge has been debated, but the increase in issuance in the days following its transition to proof-of-stake seemed to refute the deflationary theory. However, due to the burn rate during October, ETH recorded his first 30 days of deflation in history.
After The Merge was completed on September 15th, the total circulation was 120,520,222 ETH. By early October, it climbed to 120,534,212 ETH. This shows that Ethereum issuance has dropped significantly as proof-of-work miners have been removed. Total supply would have approached 120,944,347 ETH had blockchain not migrated to his PoS model.
Graph below from ultrasound.money Chart Ethereum supply after merge.
Total supply has been declining since October 8, as the burn rate exceeded Ethereum issuance, causing a drop in ETH in circulation. As a result, 49,562 ETH was consumed at an average of 1.15 ETH per minute for him in the last 30 days. Total Ethereum supply appears to have peaked and is only a few days away from potentially falling below what was in circulation at the time of the merge.
About 3,318 ETH are currently consumed daily, with the most significant contributors being Uniswap, OpenSea, and Tether. The combustion mechanism within Ethereum is EIP-1559 When programmed to consume a “base fee” during each transaction. This basic charge fluctuates depending on market conditions and network congestion. For ETH to deflate, the average base must be above 15 Gwei. At the time of writing, the average fee is double the required level, around 36 gwei.
Ethereum is heading towards solidifying deflationary conditions from its current on-chain indicator, but this does not necessarily mean that ETH in circulation will drop sharply. If current trends continue, Ultrasound’s projections show 119,600,000 ETH by October 20, 2024, a decrease of just 0.775% or 0.387% per year.
An increase in the base rate may further reduce the total supply. However, from our analysis of the available data, it is highly likely that the total supply of Ethereum will remain fixed for the foreseeable future with a tolerance of around 1%. Ultrasound’s long-term forecast graph shows that until 2072 supply will not fall below 100 million.
