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Ethereum's (ETH) Profitability Plummets to 45% as Burning Mechanism Does Not Work

Sun, 12/18/2022 - 10:54
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Arman Shirinyan
Ethereum's burning mechanism and profitability showing poor results
Ethereum's (ETH) Profitability Plummets to 45% as Burning Mechanism Does Not Work
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Ethereum's battle with inflation continues: the second-biggest cryptocurrency on the network has been continuously trying to break through the inflation threshold, and it almost turned back into being deflationary before its network activity plummeted once again, causing another plunge on the market and a following profitability drop.

According to IntoTheBlock's market data, Ethereum's profitability fell further below the 50% threshold and reached 45%, which is still considered neutral in comparison to other assets on the market, but still below average for Ethereum, which has been historically profitable for the majority of its holders.

ETH Chart
Source: TradingView

The data suggests that the majority of Ethereum holders are facing an unrealized loss. With a continuation of such a trend, it will become exponentially harder for Ethereum to break through in the future, as the majority of investors who face unrealized losses and still hold assets tend to sell at breakeven rather than hold cryptocurrencies or any other assets while they turn profitable.

The descending trends in profitability and burn rate are two significant factors that affect Ethereum's value on the market. In the last 48 hours, Ethereum dropped below the important threshold at $1,200 and reached a two-week low at $1,178.

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While the price drop is not critical for Ether, such a dynamic creates a condition where less inflows will be directed toward the cryptocurrency, hence leading to a further downfall in network activity and an increase in issuance.

Unfortunately, Ethereum is completely dependent on the current market conditions and mostly follows Bitcoin and the general movement of capitalization on the market. At press time, the majority of assets on the market are losing their value, as is Ethereum.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.