• Ethereum (ETH) price is set to surge due to two key deflationary tailwinds.
• Factors include safe-haven demand and easing financial conditions.
• The Annualized EIP-1559 Burn Rate has been negative more-or-less every day since the end of January, which means individual ETH tokens are becoming scarcer at a faster rate.
Ethereum Price Set for Surge
The Ether (ETH) price has seen a brief rally earlier this month when the “shapella” upgrade optimism lifted it to 11-month highs in the mid-$2,150s. It is currently trading close to $1,900, still up around 4% for the month but over 11% below its earlier monthly peak. Analysts are optimistic on the cryptocurrency’s medium to long-term prospects due to two key deflationary tailwinds picking up.
Factors Driving Ethereum Price Upwards
Bank crisis concerns continue to bubble with First Republic recently taken into FDIC receivership and with the Fed’s tightening cycle coming to an end soon, blue-chip cryptocurrencies like Bitcoin and Ethereum will likely benefit from these macroeconomic conditions – safe-haven demand as an alternative form of money and easing financial conditions such as a lower US dollar and US bond yields.
Supply Deflation Rate Keeps Rising
The rate at which the Ether supply is deflating continues to trend higher with its Annualized EIP-1559 Burn Rate surpassing its ETH Issuance Rate by 1.753%. This net inflation rate has been negative more or less every day since the end of January according to crypto analytics firm Glassnode – meaning that individual ETH tokens are becoming scarcer at a faster rate. Most analysts think this ought to boost the cryptocurrency’s price in the long run.
Rise in Network Fees
The rise in deflation rates is linked to an increase in Ethereum network fees which are split into two components – base fee that all users must pay for their transaction acceptance and processing and then an optional tip users can pay have their transaction processed quickly. The network automatically calculates this base fee which rises during times of heavy network traffic. Such fees can provide extra support for Ether prices going forward as they become more scarce each day due to increased demand from investors looking for safer investments during uncertain economic times.
Ether prices have been taking a breather lately but analysts remain confident about its medium/long term prospects thanks to deflationary tailwinds that should help push prices up significantly over time, especially as economic conditions remain uncertain across much of world markets today