Second biggest cryptocurrency on market is going through problematic stage
Issuing burn rates and overall supply on Ethereum have been some real and serious issues lately as the cryptocurrency market remains anemic despite all the events seen a few weeks ago.
Is it dangerous?
Ethereum Merge and EIP-1559 were backbones of Ethereum’s market value and performance. The improvement proposal has introduced burning mechanisms that have been removing enormous Ethereum volume from the market for more than a year now, while Merge switched off the PoW mechanism, decreasing the overall issuance on the network.
With less ETH in investors’ wallets, less selling pressure is being provided on the asset’s market price. However, the whole system only works when network activity is high enough to provide enough fuel, therefore reducing the current supply in the market.
Unfortunately, analysts and experts have not projected the possibility of enormous activity drop by the end of 2022. After the destructive bear market, the crash of Luna, the FTX implosion and more, an absolute majority of investors left the market, leaving it for retail investors who are not able to provide enough activity for Ethereum burning machines to work with.
As Ultrasound.Money suggests, the Ethereum issuance offset dropped to 0.89x, suggesting that the majority of coins issued by the network are not burned and injected into a slowly growing supply.
But despite the issuance surplus, Ethereum’s problem with burning is not the only reason behind the poor price performance. As we mentioned above, the current state of the cryptocurrency market leaves no possibilities for assets to grow, and the only thing that will solve this issue would be the recovery of inflows to the market, which is not going to happen in current economic conditions.
