Ether’s supply could be after Ethereum’s crisis

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By Berto R

While the Ethereum community (ETH) faces some internal debates about the structure of the Ethereum Foundation (EF) and questions about an excess of dependence on second -layer networks (L2), another difficulty grows for a long time for the network, especially For your native token, Ether.

And, from April 2024 to the present, the amount of ETH that is added to the market through the Ethereum Staking is exceeding the rhythm of burning, putting in check the narrative of the narrative cryptocurrency as “ultrasound money.

One of the drivers of the concept “ultrasound money”It was Justin Drake, a researcher at the Ethereum Foundation. The community of that network popularized the expression to compare Ether (ETH) with Bitcoin (BTC), a currency to which the nickname was linked “sound money”(Solid money) for its limited offer of 21 million BTC and its deflationary characteristic.

The concept linked to Ethereum gained strength in the past through two independent events that bet to immerse this chain in a deflationary monetary policy: The Merge update and the proposal of improvement of Ethereum 1559 (EIP-1559).

The implementation of The Merge in September 2022 in Ethereum marked a turning point in the emission and burning of ETH, since by replacing the mechanism of consensus of work test (POW) with the test of test of participation (POS), the Red opted to reduce the amount of ETH issued as a reward for validators.

On the other hand, in August 2021, with the “London” update, the EIP-1559 was introduced. This proposal reformed the rate mechanism when introducing a model where part of the base commissions (base fee) They burn permanently, and validators can receive a tip (tip fee) for prioritizing transactions. In addition to seeking greater predictability in transaction costs, EIP-1559 He opened the door to a potentially deflationary supply.

Indeed, the change of consensus algorithm, combined with the burning introduced by the EIP-1559, contributed to a reduction in the total supply of Ether in the post-market period.

In the following graph, provided by the Ultrasound Money site, the evolution of the ETH supply is observed from the Merge update to the present. In the first months after implementation, The broadcast still exceeded burningkeeping Ethereum in a period of slight inflation. However, as of January 2024, Ether’s burning began to overcome the broadcast, taking the network to a deflationary phase in which more ETH was withdrawn from the market than it was generated.

Currently, Ether has a net reduction of almost 9,000 ETH in his supply. Source: Ultrasound Money.

The current figures extracted from the Ultrasound Money site show that between the burns and those issued by the Staking, there are A net reduction of almost -9,000 eth in its supply. That data represents a supply decrease of approximately -0.003% per year.

However, although now the burning of ETH still exceeds the broadcast, since April 2024 Total supply increased steadily at the expense of Ether’s burning. This suggests a change in the economic dynamics of the network, where the demand for transactions in the main layer has decreased, affecting the amount of burned ETH. Meanwhile, Staking broadcast remains constant.

So … is Ethereum currently deflation?

For current data, the answer should be “yes”: Ethereum is currently deflation, since the burning is greater than the issuance. However, it is in an immensely lower magnitude than in previous periods (post-merge). So much so, if the trend in increasing Ether’s supply continues, Ethereum could enter an inflationary period In the near future.

The problem is that the burning system provided by EIP-1559 It depends directly on the demand of Ether and the activity on-chain In the main network of Ethereum. If the activity falls, there are fewer users paying rates, therefore, less Ether are burned while the staking emission increases the supply.

In this sense, a factor, among others, which harmed Ether’s demand was the growing adoption of second -layer networks (L2) of Ethereum. That more users leave the main network of Ethereum produced that part of the traffic that was previously promoting burning in layer 1, deviated towards L2.

Cryptonotics notified that, in coincidence with the months in which Ether’s burning in 2024, metrics decreased on-chain of L2 as performance, amount of transactions and active accounts grew. At present, this growth, although at a lower pace, persists.

For example, as of January 29, 2025, the base and arbitr networks gather almost 1.2 million and 311,000 active accounts, respectively, while Ethereum has almost 450,000, according to Grow the Pie data.

In other words, between the two most operated L2 of the Ethereum ecosystem, they would be “Robing” more than 1.5 million users to the main chain.

L2 increased their adoption notoriously in 2024. Source: Grow the Pie.

Reviewing the amount of transactions in Ethereum and some of its L2, the difference is even broader in favor of the latter:

Base, the L2 of Ethereum, accumulates as of January 25, 2025 more than 9.6 million transactions. Source: Grow the Pie.

Consequently, the deflation of Ethereum is not guaranteed unless the activity of the main layer is maintained high enough so that the burning exceeds the ETH constantly issued.

How did the price of your supply impact on the ETH price?

Predictably, the increase in Ether’s supply, which is equivalent to low demand in Ethereum, led to the price of ETH will experience a bearish trend from April until the beginning of November 2024.

While in March 2024 he quoted around 4,000 dollars, then fell until he touched its lowest point in August of that year, to the area of ​​the $ 2,100, according to TrainingView data.

At the time of this ETH article in the area of ​​$ 3,300. Source: TrainingView.

Thus, while Ether’s price does not end up rising, the increase in its total supply questions Ethereum’s narrative as «ultrasound money«, Since the reduction of the offer is no longer as pronounced as it was in the first months after The Merge.

The current supply problem in Ethereum could deepen, or one of the most important causes, the internal crisis that crosses the ecosystem of this chain product of high debates.

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