Ethereum is set to become deflationary post Merge, historical data shows

Ethereum is set to become deflationary post Merge, historical data shows

After the developers working on the Ethereum (ETH) network tentatively scheduled the Merge upgrade for September, analysts interested in the cryptocurrency market are looking at past information to predict the token’s activities after the update.

One of them is Lucas Outumuro, the director of research at data analytics startup IntoTheBlock, who posted a chart on his Twitter account on July 22, demonstrating the historical data of Ethereum’s net issuance, as well as its projection beyond the Merge.

Commenting on these findings, Outumuro stated that:

“ETH will become deflationary following the merge.”

Analyzing Ethereum’s behavior after another major upgrade – the EIP-1559 in August 2021, he explained that the token’s net issuance was likely to range between -0.5% and -4.5%, depending on the network fees.

Ethereum’s projected deflation post Merge. Source: Lucas Outumuro

The deflation of Ethereum could result in its price decrease, which could be beneficial for the investors due to increasing their purchasing power. 

For instance, back in March, Finbold reported that Bitcoin’s inflation was 5x lower than the U.S. dollar’s at the time and decreasing as Bitcoin’s inflation rate was following its “preprogrammed, fully predictable downwards trajectory.” 

Ethereum price analysis

Meanwhile, the announcement of the Merge scheduling pushed the price of Ethereum above the $1,500 mark, increasing its value by over 45% in a single week, and resurrecting the wealthy crypto investors’ confidence as they went into the accumulation mode.

As things stand, Ethereum is currently trading at $1,627, up by 9.05% in the last 24 hours and gaining 33.43% over the previous week. The total market worth of the decentralized finance (DeFi) asset is $197.88 billion, according to CoinMarketCap data.

Ethereum 7-day price chart. Source: CoinMarketCap

In early July, the crypto community at CoinMarketCap anticipated that ETH would trade at an average price of $2,539 by the end of the month, with 11,529 community votes, as Finbold reported.

More recently, the panel of 53 fintech experts has predicted that the second-largest crypto asset by market capitalization would trade at $1,711 by the end of the year, but not before first dropping to as low as $675. 

At the same time, the price of Ethereum Classic (ETC) – the inheritor of the original blockchain – also saw remarkable gains partly powered by the network activity on the main Ethereum blockchain in preparation for the Merge upgrade. 

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

Source: https://finbold.com/ethereum-is-set-to-become-deflationary-post-merge-historical-data-shows/