Ethereum deflation rate is accelerating by the day: Here’s what to expect from ETH price


  • Ethereum issuance has hit its most deflationary level since the Merge, when the asset transitioned from Proof-of-Work to Proof-of-Stake. 
  • ETH price climbed to its highest level since mid-September, riding the wave of bullish sentiment among market participants. 
  • The circulating supply of the altcoin has decreased by $40 million since the Merge, and ETH price has cranked to a five-month high.

Ethereum, the second largest cryptocurrency by market capitalization, has turned deflationary since its transition to Proof-of-Stake. The altcoin’s issuance has been on a steady decline whilst its price, meanwhile, has cranked up to a five-month high. 

At $1,700 Ethereum price hit its highest level since September 2022, as evidence of shrinking supply and consistent demand among market participants bid the cryptocurrency higher. 

Also read: Three altcoins to buy in 2023 if this bull rally continues

Ethereum turns deflationary with negative issuance in 2023

Ethereum, the largest altcoin in the crypto ecosystem, has witnessed a tapering in its issuance since the Merge. The Merge was the event where ETH transitioned from a traditional consensus mechanism of Proof-of-Work to Proof-of-Stake (PoS), reducing its energy consumption by as much as 99%. 

By supply demand dynamics, the altcoin’s shrinking supply coupled with consistent demand has fueled a rally in its price. Ethereum price wiped out its losses since September 2022 and made a comeback above $1,700 earlier today. 

Ethereum price chart

Ethereum price chart 

Based on data from UltraSound.Money, a tracker for the circulating supply of Ethereum post Merge, 120.49 million ETH is in circulation. The number has decreased by $40 million or 23,651 ETH tokens since the successful transition to PoS. 

Ethereum supply since the Merge

Ethereum supply since the Merge 

Data from the Ultrasound.Money tracker reveals that ETH issuance has declined to its most deflationary level since September 2022. It's interesting to see the rise in price alongside declining circulating supply of the altcoin. 

In addition to the reducing supply, several bullish developments are lined up  that could act as a catalyst for the altcoin’s price in 2023.

ETH tokens staked on the ETH2 deposit contract hit record highs recently 

16.69 million ETH tokens have been staked, marking a record high in the history of the Beacon Chain contract. Despite the upcoming token unlock, market participants are aggressively staking the altcoin in the ETH2 deposit contract. 

While the value of ETH staked fluctuates with the price of Ethereum, the total number of deposits on the Beacon Chain contract is a reliable indicator of market participants’ inclination and interest in staking ETH tokens. 

ETH 2.0 total number of deposits

ETH 2.0 total number of deposits 

As seen in the chart above, the total number of ETH deposits on the ETH2 deposit contract has climbed consistently, hitting a record-high. 

Alongside staking on Beacon Chain, ETH holders are exploring liquid staking on protocols like Lido DAO (LDO) and staking in any form effectively reduces the circulating supply of the asset, fueling a bullish narrative for the cryptocurrency. 

Ethereum’s upcoming Shanghai Upgrade is a bullish catalyst 

Ethereum's Shanghai Upgrade is scheduled for mid-March 2023 and analysts at JP Morgan believe this will raise the blockchain's staking ratio in the mid-term. The rise in staking ratio is expected to match other major PoS blockchain networks like Solana and Cardano. Nikolaos Panigirtzoglou believes that the number of validators (that attest blocks as accurate and add them to the blockchain) could increase from 0.5 million to 2.2 million and the yield could decline from 7.4% to around 5%. 

Rise in staking is bullish for the asset, as seen previously. 

Ethereum price targets the $2,500 level

Ethereum price recently wiped out its losses from the past five months, climbing to the $1,700 level despite the rising uncertainty in the crypto market. 

Now analysts believe the altcoin is set to hit the $2,500 target. @Wolf, a crypto influencer and technical analyst on Twitter has identified $1,935 as the next immediate resistance for Ethereum in its uptrend. 

ETH/USD price chart

ETH/USD price chart

Wolf’s target for Ethereum is $2,509.91, a level previously seen in April 2022. The altcoin is in a short-term uptrend, and a continuation could push the asset to its target of $2,509. 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content


Recommended Content

Editors’ Picks

XRP struggles to make comeback above $0.50 as Ripple CEO will face trial

XRP struggles to make comeback above $0.50 as Ripple CEO will face trial

XRP remains range-bound under the $0.50 resistance on Friday after news that Ripple CEO Brad Garlinghouse will have to face a trial in California regarding some statements he made in 2017. 

More Ripple News

Bitcoin Weekly Forecast: Is BTC out of the woods?

Bitcoin Weekly Forecast: Is BTC out of the woods?

Bitcoin appears poised for a slight decline this week, influenced by factors such as the German Government's deposit of over 1,700 BTC in exchanges, decreasing outflows in US spot ETFs, and on-chain data indicating no signs of BTC DeFi liquidation.

More Bitcoin News

1Inch looks poised for downward correction

1Inch looks poised for downward correction

1inch price moves lower by 3% on Friday after being rejected by the 200-day Exponential Moving Average on Thursday. On-chain data shows a decline in Development Activity, signaling negative sentiment among 1INCH investors. 

More Cryptocurrencies News

LayerZero ZRO token tumbles 24% in 24 hours, hit by airdrop-related controversy

LayerZero ZRO token tumbles 24% in 24 hours, hit by airdrop-related controversy

LayerZero’s ZRO token airdrop went live on Thursday, with a claiming mechanism called Proof of Donation. The team requires 10 cents in USDC, USDT or Ether per ZRO token with the aim to weed out manipulative Sybil entities. 

More Cryptocurrencies News

Bitcoin: Is BTC out of the woods?

Bitcoin: Is BTC out of the woods?

Bitcoin (BTC) appears poised for a slight decline this week, influenced by factors such as the German Government's deposit of over 1,700 BTC in exchanges, decreasing outflows in US spot ETFs, and on-chain data indicating no signs of BTC DeFi liquidation. Technical indicators suggest BTC might experience a 3% correction in the near term before continuing its upward trajectory.

Read full analysis

BTC

ETH

XRP