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Top Crypto News Today: Why is ETH token issuance dropping since the Merge?

Top Crypto News: Why is ETH token issuance dropping since the Merge?

Key Takeaways 

A snapshot of the Ethereum Beacon Chain Merge 

The Ethereum upgrade from Proof of Work to Proof of Stake took place on September 15, 2022. The Merge has been scheduled in phases 0-1-2. Phase 0 was to deploy the standalone Beacon chain, while phase 1 was the Merge where the Ethereum blockchain transitioned to a PoS chain with the Beacon chain. Now the next step is introducing Sharding to Ethereum which will essentially make the blockchain scalable.

Transition to a deflationary token model: a hype or a work in progress?

ETH’s issuance rate has fallen by a whopping 98%. On-chain data suggests that the asset is on its way to becoming deflationary. The supply of ETH has been in the range of 7,385.47 ETH whereas had the chain been on Proof of Work the estimated supply of tokens would be 128,422.13 ETH.

In the last 24 hours, ETH’s supply has been up by 0.34% which is just a fraction of what it used to be when the chain ran on Proof of Work consensus. 

Low Network Activity on ETH

Some people are also attributing the low issuance to low network activity on the Ethereum network which means low gas fee on the Ethereum network. The network activity had declined just before the PoS transition and has continued post the Merge as well. 

Ethereum may have Merged to PoS but is not deflationary yet. 

Ethereum is not a deflationary token yet because the issuance of ETH is still higher compared to the burning of ETH. The supply of ETH PoS is growing but at a slow pace. According to stats, the number of ETH tokens issued are 772 but the number of tokens burnt are just 519 in the past one day. 

What do experts have to say about the current status of ETH?

Arthur Hayes, Co-founder of BitMEX believes that Ethereum does not have to be a deflationary token post the Merge feat. He added that Ethereum should focus on it becoming an inflationary token.

Lucas Outumoro, head of IntoTheBlock predicted that ETH may remain inflationary if the demand remains low.

Ethereum slipped below $1500 post the Merge

Ethereum has been trading a little over $1300 for the past few days. ETH’s issuance rate has not been of any influence on the price of ETH. Ethereum Price has dropped by 9.8% in the last 7 days. 

The asset has crossed $2000 days before the historic Merge but has slipped below the support of $1500. In contrast to ETH, XRP has shown a rally of 20 – 40% in the last few days particularly due to the lawsuit nearing a consensus. 

The issuance rate of ETH and the price slump cannot be fully attributed to the recent regulations and changes happening in the White house or the Fed increasing interest rates.       

Additional Read: Ethereum Price under 1300

Source: Beincrypt

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