Ethereum’s total supply is on the rise, nearing levels not seen in almost four years. This surge in supply poses challenges for Ethereum’s price growth, especially as it lags behind Bitcoin and other major altcoins in recent months.
Ethereum’s ETH Supply Reaches Near Two-Year High
Data from CryptoQuant reveals that Ethereum’s current supply is at 120,501,906, approaching its peak last seen in February 2023. If this trend persists, Ethereum could soon surpass its pre-Merge supply levels.
The Ethereum Merge transitioned the network from Proof-of-Work (PoW) to Proof-of-Stake (PoS) to make ETH deflationary. Despite decreasing ETH issuance through staking activities, Ultrasound Money reports a notable increase of 45,724 ETH in just thirty days. This rise in supply amid weak demand could lead to bearish trends.
Reduced Validator Count Indicates…
Ethereum’s PoS model relies heavily on validators who stake ETH to validate transactions. In the past three months, the number of validators on the network has decreased by about 2% to 1,057,356.
This decline suggests a rise in unstaking behavior contributing to the escalating supply. As per Validator Queue, the staked ETH currently represents 27% of Ethereum’s circulating supply.
Diminished Activity on Ethereum Mainnet
Aside from the waning demand for ETH staking, decreased activity on Ethereum’s mainnet may also be a factor in the expanding supply. Every transaction on Ethereum incurs a base fee in ETH, which is burned later to add deflationary pressure. However, reduced mainnet activity translates to lesser burned tokens, increasing the supply.
L2Beat data shows a shift of activity from the Ethereum mainnet to layer two networks. For example, the 30-day transaction count on Base network is around 312M, nearly ten times higher than Ethereum’s 36M transactions.
Increased reliance on layer two networks over the mainnet could impede the burning process, affecting the circulation of ETH.
ETH/BTC Reaches Lowest Level Since 2021
Amid Ethereum’s supply challenges, Bitcoin continues to outshine as ETH/BTC drops to 0.02996, marking its lowest point since March 2021.
ETH/BTC has been moving within a descending parallel channel on its weekly chart. With a recent dip breaching the lower trendline, Ethereum is indicating a downtrend and the potential for new lows.