Ethereum goes deflationary for the first time since the merger – ETH price still at risk of falling 50%

A bearish technical setup and a decreasing number of Ether whales pose downside risks to ETH price.

Market analysis

Ether (ETH) annual supply rate slipped below zero for the first time since Ethereum transitioned to proof-of-stake via merger in September. The reason? A spike in on-chain activity amid a massive cryptocurrency market crash.

Ether is getting deflationary for real

As of November 9, more Ether tokens are being burned than created under Ethereum's fee-burning mechanism. Simply put, the more on-chain transactions, the more ETH transaction fees are burned.

Over a 30-day period, the Ethereum network burned ETH at an annual rate of 773,000 tokens against the issuance of 603,000 tokens. In other words, the supply of ETH is decreasing by 0.14% per year.

Ether growth in supply as of 11 November. Source: Ultrasound.Money

Overall, the Ethereum network has burned 2.72 million ETH since the introduction of the fee-burning mechanism in August 2021. This equates to the permanent destruction of almost 4 ETH per minute.

Ethereum transaction fees have risen to their highest level since May 2022 due to traders rushing to transfer their ETH to and from exchanges amid FTX's dramatic collapse.

Ethereum transaction fee performance in .. .