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It was Feared! That Altcoin Was the Victim of Low User Interest!


Ethereum’s (ETH) burn mechanism was the key factor in increasing the asset’s strength in the market during the 2022 bear market. The second largest cryptocurrency coin on the market is trying to fight the selling pressure thanks to the deflation mechanism, which, unfortunately, does not seem to help at the moment.

Deflationary Expectation and Inflationary Reality

According to the data provided by the crypto data platform Glassnode, Ethereum’s incineration mechanism (EIP1559) is not working as well as expected. Since the transition from Proof of Work (PoW) to proof of Stake (PoS), the total net ETH issuance has exceeded 2,317 in recent days. Although the ETH issuance of the Ethereum network fell after The Merger, this outflow ensured that the network became inflationary in the post-Merger period.

Despite everything, it seems that EIP1559 continues to be effective and the incineration mechanism is working, despite the decrease in the average amount of ETH burned per day. Since Ethereum’s PoW algorithm became unusable, almost 130 thousand ETH has been removed from circulation and destroyed.

Why Is ETH Issuance Increasing?

The burning mechanism itself works in relation to the general network activity of Ethereum and the low volume of transactions, and interactions with smart contracts create conditions in which ETH is almost never used. This leads to the fact that a low amount of ETH is burned along with a low volume.

Unfortunately, the situation will continue to remain the same until the activity of the network returns to normal values. The amount of ETH burned in the current market conditions is not expected to increase. The highest burning volume seen by the network was during the periods when DeFi and NFT were trending. Thanks to the enormous network usage seen at that time, it was even seen that more than 200 ETH was burned per block with EIP1559.

It is currently unclear when network users will again see the same degree of network usage and activity seen in 2021. This means that before that, the market will have to work with a surplus of ETH (issue surplus) until the situation normalizes.

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