Ethereum (ETH) price ranged between $1,930 and $1,960 after another failed attempt to cross the $2,000 range this week. While the on-chain data currently presents a risk of Ethereum supply stress, the increase in staking has yet to be reflected in the recent ETH price movement.
Since the completion of the integration of Ethereum 2.0 in April 2023, ETH has seen an unprecedented rise in staking activity. Remarkably, however, the continued rise in Ethereum 2.0 staking activity has not resulted in a huge jump in the price of ETH as many expected.
Staking Ethereum activity is at an all-time high
according to glassETH staking reached an all-time high in May 2023. But in the past month, investors have continued to hoard more coins, pushing the bar even further.
The chart below shows that between June 1st and July 4th, ETH holders locked up an additional 1 million ETH coins. This brings the total bunkered ETH to about 30.6% of the total circulating supply.
Supply in smart contracts Summarizes the total percentage of the circulating supply of the asset that is currently locked into DeFi staking protocols. Secures the network and provides liquidity for projects built on it.
Supply pressure usually occurs when the supply of an asset is limited or restricted. This often leads to astronomical price increases due to temporary difficulties in obtaining the asset.
When staking activity increases, the supply of tokens available to fulfill market orders decreases proportionately. If this situation persists, it could lead to supply pressure for Ethereum.
It is unlikely that the Ethereum supply pressure is due to the downward trend in the burn rate
Another important factor affecting the net supply of Ethereum is the burn rate. This indicates the percentage of existing coins that have been burned and taken out of supply. This can be in the form of destroying existing coins or reducing newly created coins.
In May 2023, Ethereum saw a high burn rate due to the memecoin rave caused by the advent of PEPE. At its peak, around 14,600 ETH was burned on May 5th, destroying coins worth millions of dollars. But since then, the burn rate has dropped dramatically.
In the two months between May 5th and July 4th, daily ETH burns fell by 80%, from 14,967 to 3,060.
Ethereum burn fees are a deflationary mechanism that takes ETH coins out of circulation by permanently destroying some of the fees previously issued to contract validators. As we saw above, burn charges are positively correlated with price.
More ETH coins are taken out of circulation when combustion charges It rises, and the lack of supply leads to higher prices.
But considering how the burned fee has decreased in recent weeks, it balances out the impact of the increased ETH tally. This can be identified as one of the reasons why the ETH supply pressure is not set.
ETH Price Prediction: Correction ahead of another attempt at $2,000
Ethereum has not been able to maintain the consistently high transaction activity necessary to cause an increase in the fee burn rate. Hence, ETH is likely to drop below $1,800 again before making another attempt at $2,000.
However, the bulls can offer some initial support around $1850. In that area, the 6.27 million investors who bought 13.41 million ETH at an average price of $1,867 can prevent a decline.
But if this support line breaks, ETH is likely to drop further towards $1750
However, the bulls also have a fair chance of remaining in control if they manage to cross the $2,000 limit. But as we saw above, the giant sell wall that 7.3 million holders have installed who bought 33 million ETH at a minimum price of $1,987 can prove to be a challenge.
However, if Ethereum supply pressure starts, ETH could finally measure the $2,000 resistance and push towards $2,700.
In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.