Fintech
Dencun Update Shatters Ethereum’s “Ultra-Sound Money” Status
Latest report from crypto analytics firm CryptoQuant questions Ethereum’s status as “ultra-sound money” after the implementation of the Dencun update mid-March. This update, designed to reduce fees and improve network scalability, accidentally made Ethereum a more inflationary asset.
However, analysts note that a slowdown in ETH’s burn rate will cause Ethereum’s price to drop by nearly $2500.
Dencun update counterproductive
The CryptoQuant Report highlights that the Dencun has significantly reduced transaction fees on Ethereum, making them on average about 4x lower than pre-upgrade levels, resulting in less ETH being burned.
Meanwhile, this caused Ethereum’s supply to rapidly increase, contrary to expectations of deflation following the 2022 merger. Following the 2022 merger, Ether experienced deflation, with total supply declining from 120.491 million to 120.097 million by September 2022.
CryptoQuant’s report highlights a 400,000 token increase in ETH supply since April, indicating a shift away from the deflationary path.
ETH price correction ahead: $2500
In parallel, Dencun’s impact on Ethereum price and market sentiment has been significant. Shin Forex, a major crypto analyst highlights that breaking below the critical 0.05 support level in the ETH/BTC pair has historically introduced substantial price corrections in Ethereum.
However, analysts have highlighted the implications of this collapse, predicting further drops to around $2,500 if Ethereum price falls below 0.04 BTC.
A bearish sentiment currently prevails Ethereum market, with the price hovering around $3,025. This reflects a modest increase of 0.76% over the past 24 hours amid ongoing market fluctuations.
Also check: CryptoQuant Report Identifies Absence of Whales in Bitcoin Uptrend Cycle