Here's why strong post-merger fundamentals could benefit Ethereum's price

Rise in staked ETH, lucrative yield on liquid staked ETH tokens, and deflationary tokenomics are possible bullish factors for the price of Ether.

Market analysis

The shift of the Ethereum blockchain to a proof-of-stake (PoS) protocol has opened up new opportunities for developers and investors to explore, including burning Ether (ETH). Now, Ethereum transactions are validated by staking rather than mining.

Staking impacts Ether supply and price dynamics in a different way than mining. Staking should create deflationary pressure on Ether, unlike mining, which induces inflationary pressure.

Increasing the total amount of funds locked in Ethereum contracts could also drive up the price of ETH in the long term, as it affects one of the fundamental forces that determine its price: supply.

The percentage of newly issued Ether to burned Ether has increased by 1,164.06 ETH since the merger. This means that since the merger, almost all of the newly created supply has been burned by the new burning mechanism, which is expected to become deflationary when the network sees light usage.

According to Bitwise analyst Anais Rachel, “It is likely that all ETH issued since The Merge will have been taken out of circulation by the end of this week.”

1/ It is likely that all ETH issued since The Merge will have been taken out of circulation by the end of this week pic.twitter.com/WqRASUwi4i

— Anaïs Rachel (@Anais_Rchl) October 27, 2022

While the chart covers the 43 days since the Ethereum meltdown, tokenomics is set to make Ether deflationary.

The reduction is attributable to Ethereum's move from proof-of-work to proof-of-stake. The total supply difference shows that Ether is still inflationary, with +1,376 ETH minted since the merger.