- ETH saw a significant increase in supply, in line with falling prices.
- A pivot could be in the cards now that demand is starting to make a comeback.
Ethereums [ETH] Supply has reportedly risen to the highest level it has reached in the past ten months. Increasing supply when demand remains constant or lower can lead to price dilution. But has this been the case for ETH?
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A recent IntoTheBlock analysis found that net issuance of ETH has increased after recovering from a three-month low. Net issuance rose to 0.50%, which is not only the highest recorded during that period but also higher than Bitcoin’s inflation rate.
The supply of ether has increased for the first time since December ’22. Low transaction costs and increasing daily issuance contribute to this inflation trend. However, with a net issuance of 0.44% per year, ETH’s inflation rate is still well below Bitcoin’s. pic.twitter.com/znWSkP4bDA
— IntoTheBlock (@intotheblock) October 14, 2023
Does this net issuance increase reflect the price action? Well, that doesn’t necessarily have to be the case because you also have to take into account the ETH burn and demand.
However, if we make a comparison between the increase in emissions and the price action over the same period, we see that the price has fallen.
We decided to explore ETH’s offering and its two-year projection and found something interesting. At the time of writing, there were approximately 8 million ETH in user accounts. Additionally, approximately 27.7 million ETH were held by validators and 32.2 million in smart contracts.
Source: Ultrasound.money
The analysis showed that supply peaked sometime in the second half of September. It was also predicted that there would be a decrease in supply by 2024. The same metric showed that the supply of ETH held by validators has increased due to a surge in long-term strikes.
Can ETH’s tide turn in favor of the bulls?
In terms of price action, ETH is showing signs of a possible reversal in the coming days. The selling pressure that has been prevalent in recent weeks has subsided and the price action over the past three days suggested that it may have found support near the $1540 price level.
ETH was exchanging hands at $1555 at the time of writing.
Source: TradingView
Can ETH’s Short-Term Support Spark a Bullish Revival? An important question whose answer could be found in the prevailing demand level of the cryptocurrency. Currency inflows and outflows showed that outflows slightly outperformed stock market inflows at the time of writing.
Read Ethereum’s [ETH] Price forecast 2023-2024
In short, demand slightly exceeded sales pressure during this period.
Source: CryptoQuant
The exchange’s outflow data could indicate that ETH was in the midst of a price reversal at support at the time of writing. However, the country’s ability to bounce back strongly and potentially provide significant upside potential could depend largely on the strength of recovering demand.