Is Ethereum Poised for Inflation? Supply Reaches New High as Staking Takes Off

While Ethereum hasn’t been quite consistent with its bullish trajectory in the past weeks, its circulating supply has done the opposite. According to data from Ultrasoundmoney, ETH’s circulating supply has skyrocketed to over 120.72 million ETH as of today.

Although this increase in supply is not straightforwardly negative for ETH, it still marks a notable shift in the network’s dynamics, fuelled largely by adopting Ethereum’s proof-of-stake (PoS) model.

Supply Increase, How And Why?

The surge in Ethereum’s total supply to 120.72 million ETH, as shown in the data from Ultrasound.money, reflects the network’s increasing activity over the past month.

In this period alone, Ethereum saw the issuance of 77,102 ETH, while 19,402 ETH were removed from circulation through a burning mechanism introduced in the network’s recent London Hard Fork.

The net increase of approximately 57,653 ETH highlights a gentle uptick in the annual supply growth rate from 0.58% to 0.69% over the last 7 days.

Notably, with Ethereum’s transition from the proof-of-work (PoW) to PoS model, the network has not only achieved a major shift in security but has also increased the rewards for participation.

Concerning the likely reasons behind the increase in supply, about 33.9 million ETH are currently staked in the network, generating substantial rewards in newly issued ETH.

This large-scale staking appears to be contributing significantly to the increase in Ethereum’s total supply. Additionally, the staking process has been further amplified by the trend of restaking, where participants reinvest their staking rewards into the network.

This restaking cycle creates a compounding effect on the issuance of new ETH, boosting the supply even as the network moves to a “seemingly” inflationary trajectory after the initial deflationary expectations set by the ETH burn mechanism.

Ethereum Market Performance

So far, Ethereum appears to be seeing a gradual price increase, from $2,500 last Thursday to currently trading at $2,652 at the time of writing, marking a 9.3% increase in the past 7 days.

This surge in value coincides with ETH’s market cap valuation, which saw a spike of nearly $20 billion over the same period. Despite this rise, ETH’s daily trading volume has seen the opposite.

Particularly, over the past week, this metric has plunged from over $21 billion to currently sitting at $12.8 billion. Regardless of this, many analysts in the crypto space remain bullish on Ethereum.

Earlier today, a renowned analyst known as the titan of crypto on X has set a $3,000 target for ETH. According to the analyst, ETH looks ready for a major rally as a “CME futures GAP” towards the upside remains unfilled.

Featured image created with DALL-E, Chart from TradingView