· ETH makes history as $1.2 billion in ETH leaves centralized exchanges in the past 24 hours.
· London Upgrade has changed Ethereum’s supply dynamics.
· Increasing reduction in the supply of Ether could soon see its price at $10,000.
Circa $1.2 billion worth of Ether has left centralized exchanges in the past 24 hours, adding to the growing supply shrinkage for Ether that’s happening via many avenues.
This new supply shock is the biggest short-term outflow for Ether, and it has given rise to speculations about the imminent price gain for the world’s second-largest cryptocurrency by market cap.
According to data by on-chain metrics provider IntoTheBlock, Ether gained 60% in May after over $1 billion was withdrawn from centralized exchanges a month prior in April.
“The net amount of $ETH leaving exchanges just hit a new record. Over $1.2B worth of $ETH left centralized exchanges yesterday. Last time $1B+ left CEXs, #Ethereum increased by 60% within 30 days.”
The speculations are despite the fact that all cryptocurrency leaving centralized exchanges does not guarantee withdrawal to cold storage by investors with intentions to hold long-term.
However, reduced supply is a key factor in price increase, especially during times of high demand.
Ethereum’s Market Dynamics Are Changing
Ethereum’s ongoing protocol upgrade has, for the past year, influenced Ether’s price in both positive and negative ways. The uncertainty around the ultimate success of Ethereum 2.0 has reduced investor confidence, especially from potential institutional investors.
At the same time, the possibility of a smooth transition to PoS could significantly boost the protocol’s Smart Contracts development environment and consequently the price of Ether.
Ethereum’s London upgrade in August introduced a burn mechanism into its fee market, which played a central role in increasing deflationary pressure on the supply of Ether. Data by Ultrasound Money shows that a total of 309,505 ETH, worth around $1.2 billion, has been burned in 42 days since Ethereum implemented the Improvement Proposal 1559.
The result is that ETH has been leaving the money supply at the rate of approximately 5.05 ETH ($18,061) every minute, totaling $26 million after the upgrade.
According to Crypto influencer and Ethereum Supporter Lark Davis, these dynamics could easily see ETH reach $10,000.
“#Ethereum supply on exchanges just keeps dropping, and the price just keeps rising. $10,000 is programmed already.”
NFTs Responsible for ETH’s biggest burn rate
The ongoing NFT craze primarily happening on non-fungible token (NFT) marketplace OpenSea, has made it the leading Ethereum DApp responsible for over 14% of ETH’s burn rate.
Popular liquidity protocol UniSwap V2 comes second with a 5.5% burn rate, while Tether, Axie Infinity are third and fourth with 4.6% and 3% burn rates, respectively.
Meanwhile, transfers on Ethereum’s base protocol have contributed to 8.7% of the burned ETH.
