Ethereum

Shift

Merge

<h2 id="key-points">Key Points</h2>
<ul>
 <li>Ethereum (ETH) has shifted from a deflationary to an inflationary trend recently.</li>
 <li>Despite this, the hope is that demand for ETH will increase with the introduction of Ethereum exchange-traded funds (ETFs).</li>
</ul>
<p>Ethereum, once known for its deflationary nature, has recently been experiencing a more inflationary trend.</p>
<p>ETH, which was trading at approximately $3,300 at the time of writing, has seen its overall supply increase despite the continued burning of ETH as part of its transaction fee model introduced in EIP-1559.</p>
<h2 id="ethereum-s-inflationary-shift">Ethereum’s Inflationary Shift</h2>
<p>The inflationary trend in Ethereum’s supply has reportedly reached its highest level since 2022, especially after its network upgrade in March.</p>
<p>Data from Ultrasound Money reveals that the total supply of ETH has expanded by over 112,000 ETH in the past four months.</p>
<p>This increase in supply is largely attributed to the effects of the upgrade, which was implemented on 13th March and had a significant impact on the network’s economic model.</p>
<h2 id="continued-burning-of-eth">Continued Burning of ETH</h2>
<p>Despite the recent inflationary trends in Ethereum’s supply due to the upgrade, the overall balance since the Merge’s implementation remains deflationary.</p>
<p>Over 1.7 million ETH have been burned due to transaction fees, according to Ultrasound Money, while the total new supply added since the Merge is over 1.3 million ETH.</p>
<p>This results in a net reduction of over 344,000 ETH being removed from circulation.</p>
<p>The ability of this mechanism to outweigh the supply increase from the upgrade has maintained ETH’s appeal as a deflationary asset.</p>
<p>Such dynamics are crucial for its long-term valuation, as the reduction in supply, assuming steady or increasing demand, can lead to an appreciation in ETH’s market price and make it an attractive hold for investors.</p>
<h2 id="prospects-of-ethereum-etfs">Prospects of Ethereum ETFs</h2>
<p>The prospects for the launch of an Ethereum ETF appear more promising, as highlighted by Bloomberg ETF analyst Eric Balchunas.</p>
<p>He noted that VanEck, a significant player in the ETF market, has taken a crucial step by filing an 8-A form for their Ethereum Trust on 26th June.</p>
<p>This form is essential for corporations looking to issue securities on national exchanges, signaling a readiness to proceed with the ETF.</p>
<p>Eric Balchunas pointed out the strategic timing of this filing, drawing a parallel to VanEck’s previous actions with their Bitcoin spot ETF, which was filed exactly seven days before its launch on 11th January.</p>
<p>This pattern suggests that the ETH ETF might be following a similar timeline, potentially indicating an imminent launch.</p>
<p>The introduction of Ethereum ETFs could significantly impact the market dynamics for ETH.</p>
<p>By facilitating broader and more regulated access to ETH for institutional and retail investors, these ETFs could increase demand for ETH.</p>
<p>This heightened demand, coupled with Ethereum’s existing deflationary mechanisms, could absorb excess supply and enhance Ethereum’s deflationary trajectory.</p>

Ethereum Grapples with Inflation: Could ETF Approvals be the Lifeline?

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