Ethereum Faces Longest Inflationary Period Since 2022 Merge

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, is experiencing its longest inflationary period since the Merge in 2022. This increase in supply can be traced back to the blockchain’s Dencun upgrade, implemented on March 13. According to the Ethereum data dashboard, ultrasound money, over 112,000 ETH, has been added to the overall supply since April 14.

The Dencun upgrade introduced nine Ethereum improvement proposals (EIPs), with EIP-4844 significantly contributing to the inflationary trend. EIP-4844 introduced “blobs,” a mechanism that stores transaction data separately and temporarily. This change aims to reduce fees for block data on Ethereum layer-2 networks.

Moreover, the Dencun upgrade brought proto-danksharding, enhancing data availability for block space on the Ethereum mainnet. While this led to a substantial reduction in transaction costs on Ethereum layer-2 networks such as Arbitrum and Optimism, it also caused a significant drop in the amount of ETH burned on the mainnet.

Despite the recent inflationary trend, the total supply of ETH has decreased considerably since the Merge. Since September 2022, more than 1.5 billion ETH has been burned, while 1.36 billion ETH has been added, resulting in an overall supply reduction of 345,000 ETH. This reduction equates to just over $1.1 billion at current prices since Ethereum switched to a PoS consensus mechanism.

The Dencun upgrade’s impact highlights the complex dynamics of Ethereum’s supply and the ongoing adjustments within its ecosystem. Introducing new mechanisms and improvements continues to shape Ethereum’s future, balancing innovation and supply management.

Crypto analyst Michael van de Poppe highlighted in X’s post the importance of a critical support area for Ethereum (ETH) against Bitcoin (BTC). In a recent chart analysis, van de Poppe emphasized that maintaining the support level around 0.051 BTC is vital for Ethereum’s continued upward momentum. Furthermore, the real altcoin momentum will start when Ethereum breaks above 0.06 BTC. 

The chart depicts ETH/BTC at 0.05514 BTC, with resistance levels at 0.05600 BTC and 0.06 BTC. The analyst suggests sustaining above the marked support zone is crucial for Ethereum to avoid further decline and potentially retest higher resistance levels.

Bitcoin price is trading at $61,678 with a slight surge of 1%. Over the past 24 hours, Ethereum’s price has reached $3,399, marking a 1.13% increase. The cryptocurrency currently holds a market cap of $408,511,568,083, maintaining its position as the second largest by market cap. The 24-hour trading volume has dropped by 44.40%, totaling $12,124,853,109.