Ethereum state on market is worsening as coin’s burning mechanism slips
of ethereum The burning mechanism has been a major factor in asset placement during the 2022 bear market. The second largest cryptocurrency on the market is successfully fighting off the selling pressure. deflation Mechanism which unfortunately is not helping right now.
As Glassnode data suggests, Ethereum’s burning machine does not work as well as one would have expected. The total net coin issuance since switching to PoS has reached +2,317 ETH recently, making the post-Merge period for Ethereum inflationary, despite the most recent drop in issuance size.
Anyway, EIP1559 remains in effect and the incineration mechanism is working despite a decline in the average amount of assets burned per day. Around 130,000 ETH have been removed from circulation as Ethereum’s PoW algorithm has become obsolete.
Why is the issuance increasing?
The burning mechanism itself works in relation to the overall network activity of Ethereum and the lack of transactional volume, and interactions with smart contracts creates conditions in which ETH barely has any usage, which leads to a low volume and number of burning activities.
Unfortunately, the situation will remain the same until network activity returns to normal values, which is impossible under current market conditions. The highest burning volume the network has seen occurred during DeFi and the NFT era. EIP1559 was able to burn over 200 ETH per block, thanks to the huge network usage that sometimes leads to contagion.
It is unclear when network users will see the same degree of usage and activity we saw in 2021, which means that before that, the market will have to work with an Ethereum surplus until the situation normalizes.
