Ethereum has been creating massive supply pressure since the major upgrade in August. The second largest cryptocurrency by market cap has burned over $4 billion USD. This could be a notable reason for the bull market in October.
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Ethereum Literally on Fire
The network introduced an upgrade with the London hard fork in August which cause a strong rally for ETH. At the same time, they introduced the EIP-1559 protocol which automatically burns specific amounts of ETH with each transaction done. According to the Watch the Burn, a supply tracking tool, the network has so far burned upwards of 853,381 ETH. The amount equals to more than $4,040,000,000 USD.
This insane statistic is especially interesting when you consider the $46,994 USD per minute burn rate in the past 24 hours. Considering these rates, it is also worth noting that Ethereum has rewarded miners with over $6.2 billion.
ETH has been hitting new ATHs lately as the demand for DApps and smart contracts is higher than ever.
The Banking giant JP Morgan stated a few days ago that Ethereum is a better investment as of this market cycle than Bitcoin. This is mostly due to the high demand for the utility the network provides for the users.
Supply Shocks Everywhere
Looking back at October, it was deduced that the primary cause for the Bitcoin rally was a supply shock coordinated by big miners. Long story short, they refused to sell the mined BTCs and caused a sudden and potent supply shock in the market. With high demands, the price grew higher and reached an ATH.
In case of ETH, the same could be said. Although the approach was different, destination was the same. Bitcoin does not have the capability to burn coins but ETH has. In that regard, the ETH burning caused a subtler and clever supply pressure.
Burning events are primarily to decrease inflation and are generally a standard method to increase demand. However, neither a Neo-classical nor a Marxist financial expert can make sense of supply shocks and burning of this scale.
In a very short time span, ETH has rewarded $6.2 billion and has destroyed $4 billion. To put that in perspective, creating enormously high demand for a currency is essentially a form of borrowing funds from the investors. And in this case, ETH is making a new definition for the term “risk”. Investors are happy with recent rallies and ATHs, but that should not be all that matters.
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