Ethereum’s switch to proof-of-stake (PoS) on September 15 failed to extend Ether’s (ETH) upward momentum as ETH miners added selling pressure to the market.
On the daily chart, the price of ETH dropped from $1,650 on September 15 to $1,350 on September 20, representing a decline of about 16%. The ETH/USD pair has been in sync with other top cryptocurrencies including Bitcoin (BTC) amid fears of higher rate hikes by the Federal Reserve.
Ethereum has been bullish
The drop in the price of Ether on September 15 was also linked to an increase in the supply of ETH, although not immediately after the merger.
$ETH Now it’s Ultra Sound Money. pic.twitter.com/fKz6VmoWdR
— David Hoffman.eth (@TrustlessState) September 15, 2022
About 24 hours later, the change in supply turned positive for once, pouring cold water on the “super money” narrative due to the false environment some supporters expected after the merger.
Pre-merger, Ethereum distributed around 13,000 ETH per day to proof-of-stake (PoW) miners and around 1,600 ETH to its PoS validators. But after the merger went live by about 90 percent, the reward for miners dropped.
Meanwhile, validators receiving Ether rewards only make 10.6% of their previous amount. As a result, the annual emission of Ether has decreased by around 0.5%, making ETH less inflationary and possibly depreciating in some cases.
According to data provided by Ultrasound Money, Ether’s supply is still growing at an annual rate of 0.2% after the merger.
The main reason behind the growing supply is low transaction fees.
Specifically, Ethereum made a change to its protocol in August 2021 that introduced a payment burning mechanism. In other words, the network has begun to permanently remove a certain portion of its fees for each transaction. This system has burned 2.6 million ETH since it went live.
The data shows that the Ethereum network gas fees should be around 15 Gwei to balance the rewards for ETH verified. But the payment averaged 14.3 Gwei on September 20, which means that the supply of ETH is generally increasing.
Nevertheless, the supply of ETH has decreased since the merger, although the supply has been positive since the merger by approximately 3,700 ETH to date.
Miners add selling pressure to ETH
Additionally, the drop in Ether price post-merger comes after Ethereum miners withdraw from the ETH market.
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According to data provided by Okelink, miners sold about 30,000 ETH (~$40.7 million) in the days before the Ethereum POS update.
Anonymous analyst “BakedEnt.eth” suggested that the ETH sales-spur by miners will mitigate the effects of the slowdown in Ether supply.
“The merger lasted for two days, but many failed to see the impact of a 95% daily consumption drop totaling 49.000 $ETH in 4 days.” He wroteAdding:
“Miners are constantly selling and have dropped more than $30,000 ETH in the same period.”
ETH price is at risk of falling below $750 given the current macroeconomic headwinds.Stresses at risk on assets across the board.
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