Does Ethereum’s surging supply signal better days for ETH?

• ETH saw a significant surge in supply, in line with declining prices.
• A pivot could be in the cards as demand started making a comeback.

Etherum’s [ETH] supply has reportedly soared to the highest levels that it has achieved in the last 10 months. A rising supply when demand remains constant or lower could lead to price dilution. But has this been the case for ETH?

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A recent IntoTheBlock analysis revealed that ETH’s net issuance has been rising after bouncing from its 3-month low. The net issuance surged as high as 0.50%, which is not only the highest recorded during that period but also higher than Bitcoin’s inflation.

Ether’s supply has been rising for the first time since December ’22. The low transaction fees and increasing daily issuance contribute to this inflationary trend. However, with a net issuance of 0.44% annually, ETH’s inflation is still well below Bitcoin’s. pic.twitter.com/znWSkP4bDA

— IntoTheBlock (@intotheblock) October 14, 2023

So, does this net issuance surge reflect the price action? Well, that may not necessarily be the case because one has to also account for ETH burns and demand.

However, if we cross-reference the issuance surge and the price action during the same period, we see that the price has been declining.

We decided to explore ETH’s supply and its 2-year projection and found something interesting. Roughly 8 million ETH were in user accounts at press time. Moreover, about 27.7 million ETH were held by validators and 32.2 million were in smart contracts.

Source: Ultrasound.money

The analysis suggested that supply peaked sometime in the second half of September. It also projected that there will be a supply decrease in 2024. The same metric revealed that the ETH supply held by validators has been rising due to a surge in long-term staking.

Can ETH’s tide shift in favor of the bulls?

As far as the price action is concerned, ETH has been showing signs of a potential pivot in the next few days. The sell pressure that prevailed in the last few weeks has slowed down and the price action in the last three days suggested it may have found support near the $1540 price level.

ETH exchanged hands at $1555 at the time of writing.

Source: TradingView

Can ETH’s short-term support trigger bullish resurgence? An important question whose answer might be found in the cryptocurrency’s prevailing level of demand. Its exchange inflow and outflow metric revealed that the number of outflows slightly outperformed the Exchange inflow at press time.

Read Ethereum’s [ETH] Price Prediction 2023-2024

In short, demand was slightly higher than sell pressure during this time period.

Source: CryptoQuant

The exchange outflow data could indicate that ETH was in the process of a price pivot on the support at press time. However, its ability to bounce back strong and possibly deliver a significant upside could largely depend on the strength of the recovering demand.