Ethereum (ETH) Faces Extended Timeline to Deflationary Status – Implications for Upcoming Bull Run

• Ethereum’s inflationary status persists as issuance remains three times the burn rate.
• Analysts are optimistic about Ethereum’s potential post-ETF approval, though a short-term drop is possible.
• Bitwise’s CIO Matt Hougan revealed that Ethereum’s daily issuance stands at approximately $10 million.

Explore the potential impact of Ethereum’s ETF approval on its price amidst ongoing inflationary concerns.

Ethereum’s Inflationary Status: A Persistent Challenge

Ethereum’s inflationary state has been a topic of debate on ‘Crypto Twitter,’ especially in light of the anticipated ETF approval. Bitwise’s Chief Investment Officer, Matt Hougan, highlighted that Ethereum’s daily issuance is around $10 million, a figure confirmed by Glassnode. On May 22, the network’s daily issuance was 2.58K ETH, translating to approximately $9.5 million based on current market prices of $3.7K per ETH.

Impact of the Dencun Upgrade

The Dencun upgrade led to Ethereum losing its deflationary status as the burn rate fell behind the issuance rate. Over the past 30 days, the network’s ETH issuance was three times more than the burn rate, a trend also observed on the 7-day chart. This increased supply could potentially hinder further price growth. Post-Merge in 2022, Ethereum had achieved a deflationary status, which was seen as a bullish signal by many, including BitMEX founder Arthur Hayes.

Potential Rally Post-ETF Approval

Despite the inflationary concerns, the potential approval of an Ethereum ETF could act as a significant catalyst for price appreciation. According to Bernstein, Ethereum could rally by 75% to $6,600 following the ETF approval, drawing parallels to Bitcoin’s price action after its ETF launch in January. QCP Capital, a crypto asset trading firm, also shares a similar sentiment, noting that ETH’s price could stabilize in the short term and rally in the mid-term.

Market Sentiment and Whale Activity

QCP Capital’s recent update on Telegram indicated that ETH perpetual funding rates went from 50% to flat in 12 hours, with June forwards still yielding 15%. This suggests reduced short-term speculation but sustained medium-term bullishness. Ethereum whales have been positioning themselves for the ETF speculation, indicating that the $4K level could be breached if the approval is confirmed. As of now, ETH is consolidating below $3800, which is 22% down from its all-time high of $4,867.

Conclusion

In summary, while Ethereum’s inflationary status remains a concern, the potential ETF approval could drive significant price appreciation. Analysts are optimistic about a mid-term rally, although short-term volatility cannot be ruled out. Investors should keep a close eye on market developments and regulatory announcements to navigate the evolving landscape effectively.