Ethereum’s total supply has contracted by more than 4,500 eth, nearing the highest level of contraction since the frenzy of November 16 sent it to minus 6,000 eth.

All time low here referring to the period since the Merge when ethereum removed the miners and went full Proof of Stake, fundamentally changing its dynamics.

Because the actual all time low was in 2015 when the genesis block launched containing about 75 million eth.

Since then and until the Merge, ethereum’s supply only went up and was on its way to doubling.

The new dynamic however has made the supply largely static, and now it is even contracting, saving some $2 billion for holders per quarter.

That’s while fees are relatively low, raising speculation that the peak of ethereum’s supply has now passed, with it currently standing at 120.5 million eth.

This new dynamic however has not quite translated into a rising ratio with it instead standing somewhat static for more than a year at the current level of circa 0.07 BTC.

That it has not fallen is a considerable change from the previous cycle when it plunged, yet that it has not quite re-adjusted is a bit puzzling.

As we can see above, ETH/BTC is kind of the new stablecoin moving in a fairly straight horizontal line since May 2021.

That’s despite the huge change in supply in September, which all else being equal, should have done something.

All else however has not quite been equal. We have the ratio plunge during summer for example, and that probably only managed to recover due to some Merge pricing in and speculation.

In November eth then held up a lot better, potentially preventing bitcoin from going down beyond $15,000.

This show of strength continued as this month opened, with eth’s ratio gaining, as well as its price in fiat amount.

Bitcoin then started turning bullish too, and it has been leading for the past two weeks. Eth has not quite kept up so its ratio has fallen, but that’s what you’d expect as these two assets have been doing this for years where one leads and the other grumblingly wonders whether to follow until eventually usually it does.

This holding up of value therefore is probably due to the supply change, and since bitcoin is bigger it may be that eth has less freedom to move solely based on its own criteria.

In particular, the supply change was not as predictable and as known as the bitcoin halvings which have been going on for a decade.

It was also not synchronized with bitcoin’s halving, but came through during the depth of bear.

Eth therefore may have to fight that bear first before getting towards any real bullishness, as bitcoin usually would have done six months or eight months after the halving, though still in a bull denial mode.

For eth it has only been four months still, so there’s plenty of space for it to show the effects of the supply change, not least considering its last hurdle which is the withdrawals unlock.

The unlock upgrade is going through a shadow fork with it to be seen just how many of these they want to have this time. Once it goes live in a few months, perhaps by March, then people will be able to withdraw their staked eth and the yield earned.

It would probably take a few weeks for that to clear out price wise, and arguably only after that can we really see what has been the effect of the supply reduction.

Because at that point all factors will be in the market, with no foreseeable new changes to the dynamics. And therefore it would be clearer whether investors have been holding out waiting for this unlock or whether this is the actual behavior of the supply effects.

Regardless, a year and a half long sideway is not quite something we’ve seen much before, if indeed at all, in this space.

It may indicate the two have found some sort of a balance with eth worth about half of bitcoin’s market cap, and whether the supply will change much is difficult to say except that eth holding the ratio during a bear market is new.

The contraction in eth’s supply in addition may increase during better sentiment, but bitcoin has better access to traditional finance. Making the relative valuation between the two difficult, which is maybe why it is sidewaying.

We’ll have a better idea once we see first whether eth does follow through in keeping up, and if it does to what extent, as this change in supply is still very new.

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• Source: https://www.trustnodes.com/2023/01/31/ethereums-supply-nears-all-time-low