The amount of ETH burned will continue to increase as transaction fees are burned
Since September 2022, traders have started withdrawing ETH from exchanges.
Since the completion of the Merge network upgrade six months ago, the quantity of ether (ETH), the second-largest cryptocurrency in terms of market value, has been steadily decreasing across exchanges. In September 2022, the Ethereum network went through a significant upgrade that consisted of switching from a proof-of-work (PoW) network to a proof-of-stake (PoS) network during an event that was referred to as the Merge.
The quantity of accessible ETH that is now languishing on exchanges continues to decrease, as shown by on-chain data that was published by the cryptocurrency analytics company Santiment. Since the Merge, the amount of ETH available on exchanges has decreased by 37%. It is a positive indicator when there is a consistent decrease in supply on exchanges. This is because there is less ETH accessible on the market for buying and selling.
Before the Merge, there were a total of 19.12 million ETH worth $31.3 billion trading hands on exchanges in the month of September. As of the second week of February, the number had dropped to 13.36 million ETH, which corresponds to a value of $19.7 billion.
A significant portion of the Ethereum supply is now being shifted into self-custody, while the Shanghai upgrade is drawing near and many traders choose staking as an investment strategy instead. The next version for Ethereum, known as Shanghai, is expected to release in the month of March. Stakeholders and validators will be able to remove their holdings from the Beacon Chain after the Shanghai hard fork, which will combine more upgrade suggestions for network advancements and enable for this functionality.
At the now, 14% of the entire supply, or 16 million ETH, is staked on the Beacon Chain. This amounts to nearly $25 billion at the prices that are currently in effect, and it is a significant quantity that will gradually become liquid following the Shanghai hard fork.
Since it became deflationary after the London upgrade, the total quantity of ETH on the market as a whole has also decreased, in addition to the ongoing decrease in the amount of ETH stored on exchanges. The fee-burning mechanism that was first implemented as part of Ethereum Improvement Proposal (EIP)-1559 is where the deflationary model can be found.
Since the London upgrade in August 2021, a total of 2.9 million ETH has been burnt, which would have had an equivalent value of around $4.5 billion in today's currency.
Image source: Shutterstock
Tags
Latest
