Ethereum price fluctuates as 210,000 enter circulation due to inflation

The recent market dynamics have again Ethereum’s offering in the spotlight and reiterated concerns about its inflationary trend. Earlier this year, Ethereum reached a significant milestone in its circulating supply, surpassing 120 million ETH, and the number continues to grow.

Unlike other well-known cryptocurrencies such as Bitcoin and Cardano, which have fixed supply caps, Ethereum was designed with an unlimited supply of tokens. This fundamental difference makes Ethereum a inflationary by naturet, one whose supply is continuously increasing.

In the chain Data from Ultrasound.money has shed light on the growing supply of ETH in recent months significant price fluctuations for the cryptocurrency. The latest data shows that the total supply of Ethereum has now reached about 120.28 million ETH.

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In the last seven days alone, 16,039 new ETH tokens were issued. This issuance pace represents an annual inflation rate of 0.70%. Interestingly, this data shows that 243,886 ETH were created in the last four months since the Dencan upgrade in March.

What does this mean for Ethereum?

Ethereum's inflation mechanism is mostly offset by token burning. This burning mechanism was introduced as part of Ethereum's London Hard Fork to introduce a deflationary mechanism in Ethereum. This mechanism aims to reduce the total supply of ETH by burning a portion of the transaction fees, creating a deflationary counterbalance.

However, data from Ultrasound.money shows that burns are currently lagging behind issuance and Ethereum is now on an inflationary trajectory. Notably, 2,028 ETH were burned in the last seven days, compared to 18,075 ETH issued in the same period. Such a sustained uptrend in supply growth could put downward pressure on ETH price in the event of a drop in demand.

At the time of writing, Ethereum is trading at $2,615, with no notable gains or losses in 24 hours. A look at the broader seven-day price history shows that Ethereum has mostly traded in a range of $2,750 at the high end and $2,530 at the low end. In recent price action, Ethereum has recovered to $2,540 in the last 12 hours. If this continues, Ethereum could possibly press upwards and test the $2,750 level again in the next few hours.

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According to the latest figures from Greeks.live, about 184,000 ETH options are expires today. These options represent a significant notional value of $470 million and are characterized by a put-call ratio of 0.8 and a maximum pain point of $2,650. This high put-call ratio value means that market participants are currently buying more put options than call options, which in turn indicates a bearish sentiment.

Featured image of Dall-E, chart from Tradingview.com