Ethereum Scarcity: After London Fork, ETH’s Supply Change Drops To Almost Zero
On-chain data shows Ethereum supply is barely changing anymore following the London hard fork. This means ETH is becoming a scarce asset now.
Following London Fork, Ethereum Supply Rate Of Change Drops To Nearly Zero
As pointed out by a CryptoQuant post, ETH’s supply curve has nearly flattened now as rate of change drops to almost zero. This has made the asset scarce.
The Ethereum supply indicator tells us about the total amount of ETH that’s currently in circulation. As miners receive a block reward (in ETH) for mining blocks, this total supply increases with time.
A related metric, the Ethereum supply rate of change shows how fast or slow the total circulating supply is going up.
How ETH’s supply works is different from Bitcoin; the latter has its total potential supply locked from the beginning. This means that there can come a point when miners will run out of BTC to mine.
Ethereum has no such limit so miners can indefinitely keep it up and the supply will keep on increasing. This would be problematic for the crypto as it will result in higher volatility.
The London hard fork exists to tackle this issue. As you know, to complete a transaction on the ETH network, you need to pay gas fees. This fees was originally given to miners. who put these coins back into circulation. But since the London fork, the fees is “burned,” and miners no longer receive it.
Now, what happens is that burning acts as a sort of deflationary measure as it reduces the total supply. Miners still mine ETH, but burning makes up for the amount mined.
Here is a chart that shows what effect the London Fork has had on Ethereum’s supply:
As you can see in the above graph, the rate of change of the Ethereum supply has dropped off to nearly zero following the EIP-1559 launch.
This has lead to a flattening of the total circulating supply. Now, ETH is also becoming a scarce asset, just like Bitcoin. A limited supply can push the price of the crypto up due to demand-supply dynamics.
At the time of writing, Ethereum’s price floats around $4.57k, up 2% in the last seven days. Over the past month, the crypto has gained 30% in value.
The below chart shows the trend in the price of the coin over the last five days.Source