Following the recent Merge update, its impact on the Ethereum platform has been noticed by both crypto enthusiasts and token holders. However, the most noticeable aspect has been the massively decreased issuance. On September 23, SassalOx, an independent Ethereum educator, tweeted that Ethereum supply had dropped from 200k to 5k.
The platform’s issuance of new ETH, each block, has been significantly lowered since Ethereum switched to PoS. While it is not yet deflationary, it’s possible that a burning mechanism added with the platform update, EIP-1559, would eventually cause Ethereum to become deflationary, meaning that its token supply will definitely decline.
However, after the ‘merge’ update was incorporated into the Ethereum platform, finally moving the platform from the energy-demanding PoW to the energy-efficient PoS, the price of ETH has fallen. Following the integration, Ethereum miners who are PoW-friendly sold their ETH and had to leave the platform, some moving to Ethereum Classic.
In addition, increased hike rates are generally not received well by investors. In an attempt to curb inflation, the Fed hikes rates, which in turn helps strengthen the dollar. Ultimately, strengthening the US currency results in more liquidity leaving the market. Valuation plummets as crypto investors tighten their spending in response to less liquidity.
Ever since the merge, ETH’s valuation has notably plummeted. However, lower issuance has been hailed as a factor for ETH holders to maintain optimism: since there are fewer ETH in use, each token should potentially be worth more.
SassalOx further stated that most of that PoW issuance was probably dumped by miners since they had to cover operating costs. Now, on the Ethereum network, with the operating costs significantly lower than PoW, most PoS issuances after taxes will be held or restaked.
