Ethereum miners dump 30K Ethereum, stonewalling the ‘ultra-sound money’ deflation narrative

Ethereum’s September 15 switch to proof of stake (PoS), despite ETH miners adding sell pressure to market, did not extend Ether’s upside momentum ( Ethereum)

The daily chart shows that the ETH price fell from $1,650 on September 15 to $1,350 on September 20, a drop of almost 16%. The ETH/USD exchange rate fell in line with the other top cryptocurrency pairs, including Bitcoin ( Bitcoin), due to concerns about higher Federal Reserve rates.

Daily price chart for ETH/USD Source: TradingView

Ethereum is still inflationary

The Ether price decline on Sept. 15 coincided also with an increase in ETH supply. However, this was not immediately after Merge.

24 hours later, the supply shift was again positive, putting cold water on the “ultra-sound money” narrative. This was due to the deflationary environment that some proponents had expected post-Merge.

Pre-Merge Ethereum distributed approximately 13,000 Ethereum per day to its proof of stake (PoW), miners, and 1,600 to its PoS validaters. However, the Merge resulted in a drop of 90% in the rewards for miners .

Validators who receive Ether rewards are now receiving 10.6% of the amount they were previously entitled to. Ether’s annual emissions have decreased by 0.5%. This makes ETH less inflationary and possibly even deflationary in certain situations.

Despite this, the Ether supply is still rising at an annual rate of 0.2% following the Merge, as per data provided by Ultrasound Money.

Ether supply rate after the Merge. Source: Ultrasound.Money

Lower transaction fees are the main reason for an increase in supply.

In August 2021 , Ethereum introduced a fee-burning system. The network began to remove a portion from the transaction fee. Since its launch, the system has used 2.6 million ETH.

Data suggests that the Ethereum network’s gas charges must be approximately 15 Gwei in order to offset the ETH rewarded for validators. The average fee was 14.3 Gwei as of Sept. 20, which means that the ETH supply has been growing.

Ethereum gas fees vs. supply. Source: Ultrasound.Money

ETH’s issuance rate dropped post-Merge. However, the supply rate is still positive, with approximately 3,700 ETH minted to date post-Merge.

Selling pressure for ETH is increased by miners

Additionally, Ether’s price drops post-Merge is due to the mass exit of Ethereum miners from the ETH market.

Similar: Does Ethereum Merge offer institutional investors a new route?

According to OKLink data, miners sold approximately 30,000 Ethereum ($40.7 Million) in the days preceding the Ethereum’s PoS update.

ETH miner address balance. Source: OKLink

Pseudonymous analyst BakedEnt.eth noted that the effect of Ether’s slowdown on issuance was offset by the miners’ ETH-selling-spree.

He added:

“Miners have been selling incessantly into this reduction, and have dumped more than 30.000 $ETH during the same period.”

ETH’s current price could drop another $750 due to current macroeconomic headwinds that are putting pressure across all risk-on assets.

These views and opinions are the author’s and do not necessarily reflect those of You should do your research before making any investment or trading decision.

Opinion writer on 7trade7