Ethereum experiences record deflation as supply shrinks rapidly

Ethereum's supply is contracting at an unprecedented rate, as deflation reaches record levels due to accelerated ETH burning. The burn mechanism, implemented through EIP-1559 in mid-September, was designed to optimize gas usage, resulting in more Ethereum being burned through network usage than produced. Consequently, issuance is negative or deflationary.

Ultrasound.Money's Ethereum tracker indicates that the supply growth over the past month has been -0.33%. On a daily basis, deflation is currently around -0.5%.

Since the Merge on September 15, Ethereum's supply has decreased by 72,186 ETH, valued at approximately $130 million at current prices. It is projected that by this time next year, Ethereum's supply will have decreased by an additional 1.3 million ETH to around 119 million.

Currently, the Ethereum burn rate is approximately 123 ETH per hour, with Uniswap accounting for around 15% of the total burn. As for staked Ethereum, 17.9 million ETH are locked on the Beacon Chain, equivalent to about $32 billion, representing roughly 15% of the total circulating supply.

Despite concerns over an influx of ETH entering the market after the Shanghai upgrade next month, a phased release process makes this unlikely. The 'Shapella' upgrade, scheduled for April 12, combines modifications to the Ethereum Virtual Machine (EVM) called 'Shanghai' and the 'Capella' consensus layer, as well as updates to the Engine API connecting the two layers.

On March 30, industry advocate Ryan Berckmans highlighted a list of accomplishments for the eight-year-old ecosystem. Despite these achievements, ETH prices remain largely in Bitcoin's shadow, following its market movements. Ethereum has gained approximately 8% in the past two weeks but remains 63% below its November 2021 peak.