Ether (ETH), the second-largest cryptocurrency by market capitalization, has been steadily reducing supply on the exchange over the past six months since the merger. The Ethereum network underwent a major upgrade last September from Proof-of-Work (PoW) to Pro-of-Stake (PoS), an event called Merge.
According to on-chain data provided by the cryptanalytic group Santiment, the amount of ETH available on exchanges continues to fall. After the merger, there was 37% less ETH on the exchanges. The constant decline in supply on exchanges is considered bullish as there is less ETH available to trade or sell.
In September, before the merger, there were 19.12 million ETH on exchanges, worth $31.3 billion. This number has now dropped to 13.36 million ETH worth $19.7 billion in the second week of February.
Much of the ETH supply is moving to self-custody, while many traders are also opting to bet as the Shanghai upgrade is just around the corner. Shanghai, Ethereum’s upcoming major upgrade, is scheduled to launch in March. The Shanghai hard fork will include more proposals to improve the network and allow stakers and validators to withdraw their holdings from the Beacon Chain.
Currently, 16 million ETH, or 14% of the total supply, is on the Beacon chain. At the current price of ETH, this is approximately $25 billion, a significant amount that will gradually become liquid after the Shanghai hard fork.
What to eat and what to expect from the Shanghai update of Ethereum
In addition to the constant decline in the supply of ETH on exchanges, the total market supply of ETH has also declined since it became deflationary after the London Update. The deflationary model is based on the fee burning mechanism introduced in the Ethereum Improvement Proposal (EIP)-1559.
Since the London update in August 2021, a total of 2.9 million ETH has been burned, valued at $4.5 billion in today’s value.
Credit : cointelegraph.com
