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Is Ethereum in Danger? Supply Offset Drops Drastically: Details

Thu, 12/22/2022 - 12:25
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Arman Shirinyan
Second biggest cryptocurrency on market is going through problematic stage
Is Ethereum in Danger? Supply Offset Drops Drastically: Details
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The burn rate and overall supply issuance on Ethereum have been having some real and serious issues lately as the cryptocurrency market remains anemic despite all the happenings we witnessed a few weeks ago.

Is it dangerous?

Ethereum Merge and EIP-1559 were backbones of Ethereum's market value and performance. The improvement proposal has introduced burning mechanisms that have been removing enormous Ethereum volume from the market for more than a year now, while Merge switched off the PoW mechanism, decreasing the overall issuance on the network.

With less ETH in investors' wallets, less selling pressure is being provided on the asset’s market value. However, the whole system works only when network activity is high enough to provide enough fuel to burn, hence decreasing the existing supply on the market.

Source: UltraSound.Money

Unfortunately, analysts and experts have not projected the possibility of enormous activity drop by the end of 2022. After the destructive bear market, the crash of Luna, the FTX implosion and more, an absolute majority of investors left the market, leaving it for retail investors who are not able to provide enough activity for Ethereum burning machines to work with.

As Ultrasound.Money suggests, the Ethereum issuance offset plummeted to 0.89x, suggesting that most of the coins issued by the network are not burned and get injected into the gradually increasing supply.

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But despite the issuance surplus, Ethereum's problem with burning is not the only reason behind the poor price performance. As we mentioned above, the current state of the cryptocurrency market leaves no possibilities for assets to grow, and the only thing that will solve this issue would be the recovery of inflows to the market, which is not going to happen in current economic conditions.

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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.