Ethereum Inflation Is Falling – Here’s Why, According to Blockchain Researcher

Ethereum’s daily issuance rate fell below Bitcoin’s for the first time this week, according to a blockchain researcher.

Lucas Outumuro, head of research at blockchain intelligence firm IntoTheBlock, says Ethereum’s (ETH) net inflation fell to an annualized rate of 1.11% compared to Bitcoin’s annualized rate of 1.75% during the middle of this week.

 

Outumuro also says that Ethereum’s falling issuance rate could bestow a monetary premium on the second-largest cryptocurrency by market cap, potentially allowing the asset to transmit value over time without users having to worry about the possible loss of purchasing power.

“Ether’s decreasing issuance raises questions about how it is valued. Previously closer to ‘digital oil’ ETH’s value moved in tandem with its usage. Now that its issuance is provably lower (and potentially deflationary), it is likely to develop a monetary premium like BTC.”

The blockchain researcher adds that the non-fungible token (NFT) craze contributed to Ethereum’s falling issuance as it increased the fees generated, a portion of which are burnt.

“The recent surge in NFT activity has significantly increased Ethereum fees and the amount of ETH being burnt along with them. This has led to several hours where more ETH was burnt than issued, effectively making it deflationary during brief periods of time.”

Finally, Outumuro says that the deflationary pressures on Ethereum will help the second-largest cryptocurrency become a store of value.

“As NFTs and other applications continue to grow on Ethereum, this creates deflationary pressure and reinforces Ether’s monetary premium. Ultimately, this aligns users and holders towards ETH becoming the store of value of the decentralized internet.”

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