- ETH supply has surged to $120.5M tokens, climbing back to pre-Merge levels.
- Analyst believe this could extend ETH’s price underperformance against BTC.
Ethereum [ETH] supply is back to pre-Merge levels, raising questions about the potential impact on the altcoin price.
For context, The Merge (the transition from Proof-of-Work, PoW, to Proof-of-Stake, PoS, in September 2022) had several key goals.
These included energy efficiency, reduced ETH issuance (supply), and a foundation for future scalability upgrades.
However, the recent shift in ETH supply dynamics, over 120.5 million ETH, indicates that one of the key goals is yet to be achieved.
Will ETH further lag behind BTC?
According to UltraSound Money data, over 46K ETH were added to the supply over the past 30 days alone. Supply growth has increased since the blob upgrade in Q1 2024.
The update made L2 transactions cheaper and transferred demand from base layer L1 to L2s, reducing the amount of burnt ETH.
As such, the ETH deflationary efforts reversed with the blobs update, and it took less than a year for the supply to grow back to pre-Merge levels.
Source: Ultra Sound Money
So, how does that affect the ETH price and holders? Well, ETH has dropped over 65% relative to BTC since the Merge.
The ETH/BTC pair tracks ETH’s relative price performance to BTC, and the decline indicates investors flocked to BTC rather than ETH after the Merger.
Crypto analyst Benjamin Cowen previously predicted that ETH supply growth to pre-Merge levels could drag the ETH/BTC pair’s land cap ETH’s upswing.
Source: ETH/BTC, TradingView
While there are plans to increase blobs adoption and scale L1, which will likely help boost ETH burn rates, the current supply dynamics could dent the altcoin short-term sentiment.
In addition, the current macro uncertainty in the broader market could cap ETH’s outlook.
According to crypto trader Cryp Nuevo, ETH could slide lower to fill the price imbalance of the recent lower candlestick wick (about 50% of the wick).
If Nuevo’s prediction is validated, ETH could chop below $3K for a while.
Source: X
