IntoTheBlock research head Lucas Outumuro in a tweet on Friday said Ethereum (ETH) will become a deflationary cryptocurrency after the Merge of Ethereum Mainnet with the Beacon Chain. Until now, Ethereum (ETH) is inflationary, but after the Merge the supply deflates over time as a result of the EIP-1559 proposing to burn ETH instead of giving it to miners.
Since the announcement of the Ethereum Merge in mid-September, the ETH price has gained upside momentum, with the price skyrocketing over 50% in 7 days. It jumped from $1090 to a local high of $1641 as the Merge is fast approaching.
Ethereum becoming a deflationary cryptocurrency after the Merge has also gathered attention from the crypto community.
IntoTheBlock research director Lucas Outumuro in a tweet said Ethereum will become deflationary after the Merge with the issuance decreasing between 0.5% to 4.5% depending on network fees. Ethereum becoming deflationary means the supply will dwindle due to the burning proposal EIP-1559.
As per the historical data, the ETH net issuance will dive lower creating a rally in the ETH price as the circulating supply will be less.
During the high network activity, the burn rates have increased massively which creates pressure in the market. Thus, causing an increase in price. The Ethereum (ETH) price should fall before the Merge as it prepares for changes in the circulation supply. Also, more traders are looking to sell their Ethereum in early September.
Ethereum co-founder Vitalik Buterin at the Ethereum Community Conference in Paris said the Ethereum Merge is only a part of the growth plan. The Surge, Verge, Purge, and Splurge stages comprise the Ethereum roadmap. The team will continue to work on increasing its scalability, efficiency, speed, and security.
The Eth 2.0 is more focused on Ethereum (ETH) staking. As the supply of ETH in circulation dwindles, stakers will be taking it out of the market to stake them to form validator nodes.
According to Buterin, the value of Ethereum will rise under the right market conditions. It will create more demand with the price rising higher, with projects such as the Polygon zkEVM supporting Ethereum.
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