The price of ethereum (ETH) appears to be preparing for a significant outbreak, according to some. There are some key signs to note at the moment that suggest such an outbreak is imminent.
Eth2 staking and ‘ether burning’
First of all, the amount of ether tokens currently in circulation is extremely low. This is the result of two developments. The first is the fact that there is a massive amount of ether tokens locked in the Ethereum 2.0 strike contract.
These tokens are fixed for a long time and cannot be traded in the meantime. The contract was launched last year and has already secured more than 7.7 million ETH by some 47,000 unique users. These tokens have a market value of no less than $28 billion.
In addition, the implementation of the EIP-1559 update has a major impact on the amount of ether in circulation. As a result of this update, some of the transaction fees that users pay are constantly being destroyed. These tokens will be permanently removed from circulation. There is now more than $1.1 billion of ether tokens destroyed and this will only increase as time goes on.
Also, as a result of this update, we have the first day that Ethereum deflationary had already been experienced. A while back, for the first time, more ether tokens were destroyed through the ‘burning’ process than new tokens were created.
Also, the amount of ether that is present on crypto exchanges currently historically low. Another example of a dwindling circulation of ether tokens.
supply shock
So it is a fact that there are very few ether tokens in circulation at the moment and that this amount is only going to decrease. This could be very positive for the price of ethereum.
This can lead to a so-called ‘supply shock’. If the demand for ethereum stays the same, or even grows which is not unlikely, then there will be a major shortage.
The market will do its job in that scenario and thus the price of ethereum is catapulted. If this happens, you can hardly make it that crazy. There is very little possible at the top of the current price of ethereum resistance.