ETH Craters to All-Time Scarcity: Could This Spark a Price Surge to $3000 for Ethereum?

According to data from Ultrasoundmoney.com, the supply of Ethereum ($ETH) has decreased 47,272 tokens over the past 30 days. As of December, 2023, the Ethereum supply has reached 120,211,639 – the lowest since the Merge.

The Merge marked one of the biggest updates of Ethereum network as Ethereum transitioned from its original consensus Proof-of-Work (PoW) to Proof-of-Stake (PoS). As a result, Ethereum post-Merge eliminated mining and adopted staking coins to validate transactions as part of the PoS mechanism.

Likewise, Ethereum’s energy consumption has reportedly decreased by 99.98%, resulting in a 99.99% reduction in its carbon footprint.

A Big Shift is Here

It was estimated that the Ethereum supply could have increased to 4.7 million if Ethereum kept up with PoW. Now with PoS, the overall supply of ETH has decreased over time thanks to the EIP-1559.

Ethereum’s EIP-1559 implementation introduced a burning mechanism for transaction fees, leading to a deflationary effect on the ETH supply. As network traffic increases, gas fees rise, consequently increasing the amount of ETH burned. This mechanism ultimately benefits the network’s long-term sustainability.

Under the original PoW, the inflation rate of Ethereum was usually around 3.196%/year. Ethereum had its first deflation in November last year due to the surge in network activity a month after the Merge. It was also the month when the FTX saga shook the industry.

Following the collapse of FTX and the resulting distrust in centralized exchanges, crypto analysts at Compass Point Research and Trading have observed an increase in burned ETH on the decentralized exchange Uniswap. This trend coincides with the ongoing growth of activity on the NFT marketplace Blur.

Motivated by the bullish momentum of Bitcoin, the Ethereum network and several other protocols, encompassing both NFT and DeFi transactions, have shown a remarkable resurgence in activity in recent months.

Ethereum gas fees have experienced a notable spike over the past month. The average fee now stands at 36.2 gwei. On-chain data shows that the network fee hit nearly 5.47 ETH.

Will Ethereum Reach $3,000 in 2023?

Ethereum (ETH) has been on a tear since early October, breaking above a descending resistance line earlier in November and continuing its ascent with accelerating momentum. After briefly encountering resistance at a horizontal zone, ETH soared to a new yearly high of $2,403 on December 9.

However, the rally didn’t last long, and ETH price has been on a downward trajectory since then. Yesterday, the decline intensified, dropping to a low of $2,145 before slightly rebounding above $2,200 today.

2024 is poised to be a landmark year for the Ethereum network with the release of its next major upgrade, Ethereum Cancun-Deneb. This upgrade will be headlined by EIP-4844, also known as Proto-Sharding, which aims to significantly reduce transaction fees on Layer-2 protocols. Additionally, the introduction of “blobs,” a novel data transfer model, addresses the ongoing challenge of data availability within the network.

The success of Cancun-Deneb upgrade has the potential to significantly boost the adoption of Layer-2 solutions by attracting more users and developers to build on these networks.

Lower transaction fees will make Layer-2 protocols more appealing for decentralized applications (DApps) and users, potentially leading to increased network usage and activity.

Beyond adding new features, upgrades are crucial for maintaining and improving the security and stability of the network. A successful upgrade ensures that the Ethereum network remains robust and secure, which is essential for garnering the trust and confidence of users and developers alike.

Positive developments, particularly those related to technical upgrades and improvements, often lead to positive market sentiment, which can potentially contribute to a favorable price trend for Ethereum.

In 2024, the price trends are bullish. It is only a matter of time until we see more record high prices.