Over the past six months, the amount of Ethereum cryptocurrency on exchanges has dropped by 37%. The decline started after the transition from Proof-of-Work to Proof-of-Stake. Now, another major upgrade is coming, which will return staked tokens back to the exchanges. Is staking the real cause of the decline, or is price manipulation hidden behind the outflow?
Ethereum is referred to as the second largest cryptocurrency in terms of market capitalization. However, according to data from the company Santiment, its amount on the stock exchanges is constantly decreasing. The change occurred after the Ethereum Merge. So, one could logically judge that instead of the exchanges, the tokens are now stored in staking and earning. According to Beacon Chain records, 16 million Ethereum tokens are stored in stakigu. While that’s a decent amount (we’re talking $25 billion at current prices), it still only represents 14% of the total supply.
Shanghai versus London
In August 2021, the Ethereum network went through the London hard fork. The introduced EIP-1559 (Ethereum Improvement Proposal) attempts to address the network deflation problem. Fees for individual transactions go directly to the network where they are burned. More than 2.9 million tokens have been burned to date. This also contributes to the reduction of market capitalization. In contrast, the Shanghai hard fork will allow validators to withdraw their holdings from the Beacon Chain. More than 16 million tokens will gradually become liquid.
Conclusion
Bitcoin has a clearly limited total supply of 21 million tokens. Ethereum does not have this limit. It only has a limited annual supply of 18 million tokens. Thanks to burning, the amount can be partly regulated and part also flows into the staking. However, judging by the amount, this does not seem to be the only reason for the decline in market capitalization. What is your opinion?
We are also new on the social network LinkedIn. If you have any question about cryptocurrencies, feel free to join us discussion groups on Facebook. Don’t forget to join ours too official discord server KRYPTOMAGAZIN CZ, where you can find other interesting content. We also have Youtube channelwhere you can subscribe, so you don’t miss any video or stream. You can support us through Patreon HERE.
