Ether’s supply rate fell below zero for the first time since Ethereum switched to a proof-of-stake system in September. There may be a reason why this is happening. There was a sharp increase in on-chain activity in the midst of a market crash.
Ether turns deflationary for first time ever
As of November 9, more Ether tokens are being discarded than are being created through the Ethereum platform’s fee-burning mechanism. The more transactions that are conducted on the Ethereum blockchain, the more ETH transaction fees are received.
On a 30-day timeframe, the Ethereum network has been burning ETH at a rate of 773,000 tokens per year. This equates to 603,000 tokens being issued against the issuance of 773,000 tokens. The supply of ETH is going down by 0.14% per year.
Since August 2021, the Ethereum network has burned a total of 2.72 million ether. This fee-burning mechanism was introduced in order to discourage miners from using ether to pay for transaction fees. That amount, or 4 ETH per minute, is the permanent destruction of nearly anything.
Ethereum’s transaction fees spiked to their highest levels since May 2022 due to traders rushing to transfer their ETH to and from exchanges amid the dramatic collapse of FTX. This caused transaction fees to increase by a substantial amount.
According to data from Glassnode, over 1 million ETH has left exchanges in November.
Many people think that Ether’s deflationary prospects are good, which will make it more scarce overall. The deflationary rate is a result of the current price volatility of ETH. This could make it harder for ETH to recover in the short term.
The price of ether is in danger of another 50% crash.
Ether’s price has fallen nearly 20% this month and is trading at $1,250 on November 11 after falling to $1,075 on local market lows.
Ether’s price is in a breakdown stage of its prevailing symmetrical triangle pattern, and may fall further by 50%.
Symmetrical triangles are continuation patterns that typically resolve after the price breaks out of its range and continues moving in the same direction as its previous trend. Technical analysis generally involves measuring the pattern’s profit target, which is determined after adding the triangle’s height to the breakout point.
The theory predicts that the downside target for Ether’s symmetrical triangle will be around $675 by December 2022, which is about 50% lower than the current price.
The length of Ether’s November downtrend has coincided with the drop in Ether supply held by addresses with a balance between 1 million ETH and 10 million ETH.
The addresses with a balance between 1,000 ETH and 10,000 ETH are seeing the most growth during the price decline.
This could mean only two things. This is because it is not moving around as much as it usually does. First, addresses with over 10,000 ETH tokens reduced their holdings, and as a result, landed in the smaller cohorts.
These groups may include exchange wallets that have seen a massive ETH outflow amid the FTX fiasco.
The 10,000 ETH cohort saw Ether’s price decline, which created an opportunity to buy low. This boosted their control over Ether’s supply in November.
