The recent market dynamics have brought back Ethereum Offering Ethereum has been in the spotlight and has reiterated concerns about its inflationary tendency. Earlier this year, Ethereum reached a significant milestone in its circulating supply, surpassing 120 million ETH and the number continues to grow.
Unlike other major cryptocurrencies like Bitcoin and Cardano, which have fixed supply caps, Ethereum was designed with an unlimited supply of tokens. This fundamental difference makes Ethereum a inherently inflationary asst, the one that has a continuously increasing supply.
In chain data of Ultrasound.money has shed light on the growing supply of ETH in recent months amid significant price fluctuations for cryptocurrency. The latest data indicates that the total supply of Ethereum has reached approximately 120.28 million ETH.
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In the last seven days alone, 16,039 new ETH tokens have been issued. This pace of issuance corresponds to an annual inflation rate of 0.70%. Interestingly, this data shows that 243,886 ETH have been created in the last four months since the Dencan upgrade in March.
What does this mean for Ethereum?
Ethereum’s inflationary mechanism is primarily countered by token burning. This burn mechanism was introduced as part of Ethereum’s London hard fork in order to introduce a deflationary mechanism to Ethereum. This mechanism aims to reduce the overall supply of ETH by burning a portion of transaction fees, thus introducing a deflationary counterbalance.
However, data from Ultrasound.money shows that burns are lagging behind issuance, and Ethereum is now on an inflationary trajectory. Notably, 2,028 ETH were burned in the past seven days, compared to 18,075 ETH issued in the same period. Such a sustained upward trend in supply growth could lead to downward pressure on the ETH price in the event of a decline in demand.
At the time of writing, Ethereum is trading at $2,615 with no significant gains or losses over a 24-hour time frame. Looking at the broader seven-day price action, we see that Ethereum has largely traded within a range of $2,750 at the higher end and $2,530 at the lower end. The latest price action saw Ethereum bounce to $2,540 over the past 12 hours. If this continues, Ethereum could Possibly push up and retest $2,750 in the next few hours.
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According to the latest figures from Greeks.live, approximately 184,000 ETH options are available ready to expire Today, these options represent a substantial notional value of $470 million and are characterized by a put-call ratio of 0.8 and a maximum critical point of $2,650. This high value of the put-call ratio means that market participants are currently buying more put options than call options, which in turn suggests bearish sentiment.
Image of Dall-E, chart from Tradingview.com
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