Ethereum’s September 15 switch to Proof-of-Stake (PoS), did not extend Ether (ETH) upside momentum, as ETH miners added selling pressure to the market.
The daily chart shows that the ETH price fell from $1,650 on September 15 to $1,350 on September 20, a drop of almost 16%. Due to concerns about Federal Reserve rate increases, the ETH/USD pair fell in line with other top cryptocurrencies like Bitcoin (BTC).
Daily price chart for ETH/USD Source: TradingView
Ethereum is still inflationary
The Ether price decline on Sept. 15 coincided also with an increase in ETH supply. However, this was not immediately after Merge.
$ETH is now Ultra Sound Money pic.twitter.com/fKz6VmoWdR
— DavidHoffman.eth, @TrustlessState September 15, 2022
24 hours later, the supply shift was back on track, turning positive again. This is despite the fact that the environment post-Merge had been deflationary, which is what some proponents believed would be the case for “ultrasound money”.
Pre-Merge Ethereum distributed approximately 13,000 Ethereum per day to its proof of stake (PoW), miners, and 1,600 Ethereum to its PoS validaters. However, the Merge resulted in a drop of 90% in the rewards for miners.
Validators who receive Ether rewards are now receiving 10.6% of the amount they were previously entitled to. Ether’s annual emissions have decreased by 0.5%. This makes ETH less inflationary and possibly even deflationary in certain situations.
According to Ultrasound Money data, the Ether supply is still rising at a rate of 0.2% per year since the Merge.
After the Merge, Ether supply rates. Source: Ultrasound.Money
Lower transaction fees are the main reason for an increase in supply.
In August 2021, Ethereum introduced a fee-burning feature to its protocol. The network began permanently removing a part of the transaction fee. Since its launch, the system has used 2.6 million ETH.
Data suggests that the Ethereum network’s gas charges must be approximately 15 Gwei in order to offset the ETH rewarded for validators. The average fee was 14.3 Gwei as of Sept. 20, which means that the ETH supply has been growing.
Prices for Ethereum gas vs. supplies Source: Ultrasound.Money
ETH’s issuance rate dropped post-Merge. However, the supply rate is still positive, with approximately 3,700 ETH minted to date post-Merge.
Selling pressure for ETH is increased by miners
Additionally, Ether’s price drops post-Merge is due to the mass exit of Ethereum miners from the ETH market.
Related: Does the Ethereum merger offer institutional investors a new route?
According to OKLink data, miners sold approximately 30,000 Ethereum ($40.7 Million) in the days preceding the Ethereum’s PoS update.
Balance of ETH miner. Source: OKLink
Pseudonymous analyst BakedEnt.eth noted that the effect of Ether’s slowdown on issuance was offset by the miners’ ETH-selling-spree.
“Miners have been selling incessantly into this reduction, and have dumped more than 30.000 $ETH during the same period.”
ETH’s price could drop another $750 due to current macroeconomic headwinds that are putting pressure across all risk-on assets.
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