In January, the supply of ETH fell by 10,145.72 units. February could be marked by a price drop.

According to data from Ultrasound moneyin January, Ethereum’s [ETH] supply fell by 10,145.72 units, resulting in a net deflationary value of approximately $16 million. At the time of writing, the current total supply of ETH is 120,515,752, with an annual growth rate of -0.012%.

Source: Ultrasound money

Read Ethereum’s [ETH] Price Forecast 2023-24

Ethereum: Deflation is preferred

The decline in ETH supply has several implications for the cryptocurrency market. A decrease in supply leads to an increase in demand, as fewer assets are available for purchase. This can drive up the price of ETH, making it more valuable. Thus, the increase in demand could also attract more investors to the market, which could further push the price of ETH up.

Also, the net deflationary value of ETH could have a positive impact on the stability of the currency. In particular, deflationary currencies hold their value over time as the decrease in supply causes a scarcity of assets. This reduces the risk of inflation and can make the currency more attractive to investors as it is less likely to depreciate.

In the meantime, the outlook is bleak

While ETH’s net deflationary value could provide long-term price stability, an assessment of price movements on a daily chart revealed that an imminent price reversal was on the horizon.

At the time of writing, ETH was trading at USD 1,569.93. In January, the value of the altcoin rose by 32%. But as many investors rallied to take profits, the buying pressure appears to have eased significantly.

A look at ETH’s moving average convergence/divergence (MACD) confirmed the start of a new bear cycle on January 27. Since then, the indicator has only returned red histogram bars and the price of ETH has fallen by 2%.

At the time of writing, the main momentum indicators focused on their respective neutral zones. ETH’s Relative Strength Index (RSI) and Money Flow Index (MFI) have continued to fall over the past week, remaining in a downward trend at 56.33 and 59.40, respectively, at the time of writing. A drop in ETH accumulation marked the past week, with many starting to sell their holdings.

Similarly, the dynamic line (green) of the coin’s Chaikin Money Flow (CMF) was intended to enter the negative zone. Many investors are hesitant to buy more ETH.

Source: ETH/USDT on TradingView

How many ETHs can you buy for $1?

The lack of new demand for ETH was reflected by a consistent drop in Open Interest over the past ten days, data from Coinglass revealed. Within that period, ETH’s Open Interest fell by 16%.

Typically, a decrease in an asset’s outstanding interest means that traders are closing their positions and there is a decrease in the number of new contracts being created. This suggests that they are becoming less confident in the asset’s future price movements and are reducing their exposure.

Source: Coinglass

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