The annual supply rate of Ether (ETH) fell below zero for the first time since Ethereum’s transition to proof-of-stake via the merger in September. The reason? A surge in on-chain activity amid a massive cryptocurrency market crash.
Ether really deflates
As of November 9, more Ether tokens are being burned than have been created as part of the Ethereum fee burning mechanism. In a nutshell, the more on-chain transactions, the more ETH transaction fees are burned.
Within 30 days, the Ethereum network has been burning ETH at an annual rate of 773,000 tokens against the issuance of 603,000 tokens. In other words, the supply of ETH is going down 0.14% a year.
In total, the Ethereum network has burned 2.72 million ETH since the commission burning mechanism was introduced in August 2021. This means the permanent destruction of almost 4 ETH per minute.
Ethereum transaction fees spiked to their highest levels since May 2022 as traders rushed to transfer their ETH to and from exchanges amid FTX’s dramatic collapse.
In detail, almost 1 million ETH has left exchanges in November, according to data from Glassnode.
Many analysts see Ether’s deflationary prospects as a bullish sign for ETH, which should fuel its overall scarcity. But the current rate of deflation is a product of ETH’s ongoing price volatility, which may hurt its recovery prospects in the near future.
Ether price is at risk of another 50% drop
Ether price is down nearly 20% so far this month and was trading around $1,250 on Nov. 11, having rebounded from its local low of $1,075.
Additionally, Ether price action has also entered the breakout stage of its prevailing symmetrical triangle pattern, which may push the price down another 50% from current levels.
Symmetrical triangles are continuation patterns, meaning they typically resolve after price breaks out of its range while chasing the direction of its previous trend.. As a rule of technical analysis, the profit target of the pattern is measured after adding the height of the triangle to the breakout point.
Applying the theory to Ether’s symmetrical triangle puts its downside target at around $675 by December 2022, down 50% from current prices.
It got rejected from 1600-1650. Now it’s looking bullish on ltf, so expecting a last leg up to 1700, matching with BTC going to 21000-21500.
1700 is a key resistance. It should get rejected hard.
Main target for a local bottom = $700-800 pic.twitter.com/UkAphVl2MV
— il Capo Of Crypto (@CryptoCapo_) November 2, 2022
$ETH
It was rejected from the $1600-1650 level. It now looks bullish on ltf so a last stretch to 1,700 is expected, coinciding with BTC going to $21,000-21,500.
1,700 is a key resistance. It should be harshly rejected.
Primary goal for a local fund = USD 700-800
The more bearish arguments stem from the recent decline in supply held by wealthier Ethereum investors.
In particular, the duration of Ether’s bearish trend in November has coincided with the drop in Ether supply held by addresses with balances between 1 and 10 million ETH.
In contrast, addresses with a balance between 1,000 ETH and 10,000 ETH have increased during their price decline.
This could mean two things. First, addresses that once held more than 10,000 ETH tokens reduced their holdings and thus reached the 1,000-10,000 ETH cohort.
Second, the 1,000-10,000 ETH cohort saw the Ether price drop as an opportunity to “buy the dip,” which fueled their control over the Ethereum supply in November.
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