Cloud Hosting

Peter Hansen/iStock via Getty Images

I view Ethereum's (ETH-USD) recent switch from a deflationary supply to an inflationary supply as a neutral development for investors. While inflation will dilute investors over time, it also allows for lower transaction fees. This will lead to increased usage of Ethereum, which could lead to more demand and higher Ethereum prices. I remain bullish on Ethereum in the long term.

ycharts

The above chart showing Ethereum's supply over the past year appears quite volatile at first glance. There have been periods of inflation, deflation, and relative stability. However, since April, the supply has been steadily inflating.

Fortunately, zooming out to a 5-year chart shows that the supply has actually been quite stable since Ethereum's switch to proof of stake in late 2022. The recent bout of inflation barely registers on a chart that includes pre-2022 data:

ycharts

While the current inflation rate may be small, it's still worth discussing because it had a clear cause that wasn't just temporary volatility. Specifically, the Dencun upgrade went live in March 2024. This "hard fork" upgrade released nine different improvements. One of these improvements - proto-danksharding - is responsible for the recent supply inflation.

Proto-danksharding reduces fees for "layer 2" transactions that are bundled together before being added to the Ethereum blockchain. This is because it allows some data associated with a transaction to be deleted after about 18 days instead of being stored permanently on the Ethereum blockchain.

Specifically, some data which is needed to initially validate and process a transaction doesn't need to be stored permanently. This data is redundant with more space-efficient data (such as validator attestations) that's available once the transaction is finalized. In other words, proto-danksharding is simply a means of allowing Ethereum users to temporarily sync some important data without storing it permanently on the blockchain.

Like other cryptocurrencies, Ethereum transactions have variable fees that are higher for transactions which require more permanent space on the blockchain. By reducing the amount of permanent storage each layer 2 transaction uses, proto-danksharding has lowered transaction fees for layer 2 Ethereum transactions.

Those who are unfamiliar with Ethereum's supply rules may not immediately see the connection between transaction fees falling and Ethereum's supply increasing. After all, Bitcoin's supply rules are more well-known, and they simply allow a fixed amount of new Bitcoin to be issued at regular intervals that were determined in 2009.

Ethereum's supply rules are more complicated because the overall supply varies based on multiple factors including transaction fees. Like Bitcoin, Ethereum issues some new supply to reward validators who secure the network. The specific amount of new supply issued varies depending on how much Ethereum is staked by validators.

To offset this new supply, some of the transaction fees paid by Ethereum users are "burned" or destroyed. If transaction fees are high enough, the Ethereum being burned will more than offset the amount of new supply issued. This leads to a deflationary supply.

On the other hand, if transaction fees are low, then the amount of Ethereum burned will be lower than the amount of new supply issued to validators. This results in an inflationary supply.

When proto-danksharding caused a large drop in transaction fees, it reduced the amount of Ethereum being burned. In turn, this caused Ethereum's recent supply inflation.

Lower transaction fees should be a net positive for Ethereum users because it reduces the overhead cost of performing transactions. This makes transactions more cost-effective overall, and is especially impactful for frequent and low-value transactions.

ycharts

The above chart shows Ethereum daily transactions over the past year. Overall, it's been very stable at about 1.1 million transactions per day - even after the Dencun upgrade in March. However, this doesn't mean the Dencun upgrade failed. The above chart only considers "layer 1" transactions, which are pretty much capped at this point due to space constraints on the Ethereum blockchain. The Dencun upgrade targeted "layer 2" transactions, which bundle many users' transactions into a single "layer 1" transaction to save space and reduce transaction fees.

There are many "layer 2" networks built on top of Ethereum, but we can see that the most popular ones began processing significantly more transactions starting in March:

theblock.co

As shown in the above chart, Arbitrum's average daily transaction volume more than doubled from less than 1 million transactions before the Dencun upgrade to over 2 million afterward. Base experienced an even larger increase and recently processed over 3 million transactions in a day. While that's still only about 1% of the volume of a large payment processor like MasterCard, it's an impressive increase in a short amount of time.

Based on these metrics, we can conclude that the Dencun upgrade's lower transaction fees have already been a net positive for Ethereum users. Thanks to these lower fees, people can transact more frequently and economically.

Ethereum's current inflation rate is negligible from an investment perspective. While Ethereum technically used to be deflationary, it was barely noticeable; Ethereum's overall supply has fluctuated by less than 1% since 2022's switch to proof of stake. And since the March Dencun upgrade, Ethereum's supply has inflated by only 0.1%. That's less than 1% inflation on an annual basis, which is lower than the average inflation rate of traditional stores of value like gold and silver.

Moreover - unlike with gold, silver, or even Bitcoin - investors can stake their Ethereum to earn a yield that offsets inflation. Even if one uses an expensive centralized staking service like Coinbase, they should be able to earn about a 2.5% annual yield. This is more than enough to offset 1% supply inflation.

Even those who don't stake their Ethereum could theoretically benefit from the Dencun upgrade if lower transaction fees lead to more demand for Ethereum. This increased demand could offset dilution from inflation. Considering its relatively stable supply, the Ethereum bull thesis has always been more about increased adoption (and perhaps weakness in the USD) than about deflation.

While the switch to inflation should theoretically have little to no impact on the Ethereum bull thesis, investors are not always rational. After Ethereum was marketed as a deflationary asset for the past two years, some investors may view the switch to inflation as a failure of their investment thesis.

At a minimum, it's fair to say that Ethereum's supply rules are proving to be more complex and unpredictable than some investors might have expected. For example, while Ethereum could end up being deflationary again in the future if users place significantly more transactions, it's virtually impossible to predict if or when this will happen.

Ethereum's switch from deflation to inflation is an interesting development that's worth understanding. This article showed how Ethereum's supply works and why the Dencun upgrade caused it to become inflationary. However, in the big scheme of things, this is a relatively minor development that shouldn't change the long term outlook for Ethereum bulls. Bulls should instead turn their attention towards larger developments such as new functionality enabled by the Dencun upgrade, plans for similar upgrades in the future, and the upcoming Ethereum ETFs.

Continue reading here:

Ethereum Becomes Inflationary (Again): What It Means For Investors (ETH-USD) - Seeking Alpha

Prominent crypto analytics firm Santiment is unveiling a list of large-cap altcoins that may see short-term rallies following last weeks correction.

The crypto insights firm says on the social media platform X that the Market Value to Realized Value (MVRV) metric of seven altcoins has dropped to negative territory.

The MVRV is the ratio of a digital assets market capitalization relative to its realized capitalization or the value of all the coins at the price they were bought. When the MVRV value drops below zero, it indicates that the coin is currently oversold or undervalued.

Says Santiment,

The lower a coins 30-day MVRV is, the less risk there is in opening or adding on to your position for a shorter-term time frame.

According to the analytics firm, top memecoin Dogecoin (DOGE) offers the least risk among notable large-cap crypto assets with an MVRV value of -19.7%. The meme token is followed by the decentralized exchange Uniswap (UNI) and the peer-to-peer payments network Litecoin (LTC) with MVRV values of -16.3% and -15%, respectively.

The leading smart contract platform Ethereum (ETH) sits at number four with an MVRV score of -13.2%. The decentralized oracle network Chainlink (LINK) takes the fifth spot with an MVRV value of -11.1% followed by XRP with a score of -10.1%.

In seventh place is the Ethereum rival Cardano (ADA) with an MVRV value of -9.9%.

Santiment notes that the only exception among large-cap altcoins is the layer-1 protocol Toncoin (TON) which has an MVRV score of +4.0%.

As for Bitcoin (BTC), the crypto king is flashing an MVRV score of -9.64%.

Don't Miss a Beat Subscribe to get email alerts delivered directly to your inbox

Check Price Action

Follow us on X, Facebook and Telegram

Surf The Daily Hodl Mix

Featured Image: Shutterstock/Alina Spiridonova/Natalia Siiatovskaia/Fotomay

View post:

Ethereum, Dogecoin and Five Additional Altcoins Flashing Short-Term Bullish Signal, According to Santiment - The Daily Hodl

If the launch of U.S. spot Bitcoin exchange-traded funds in January embodied a watershed moment for the crypto industry, the debut of spot Ether ETFs on Wall Street could be nothing short of revolutionary.

Following the Securities and Exchange Commissions (SEC) approval of all Ether ETFs in total pivot on May 23, the President of The ETF Store, Nate Geraci, believes the funds could be listed and traded this month.

In an X (formerly Twitter) post on July 7, Geraci said that he would be shocked if spot Ether ETFs are not listed for trading within the next two weeks.

When asked why he suggested the week of July 15 as the likely timeline for the Ether ETF launch, the ETF Store president said the forecast was based on the timing of filings with the securities watchdog.

Geracis comment comes as observers continue to speculate what the potential launch of Ethereum ETFs means for the crypto industry and whether the funds would emulate the success of Bitcoin ETFs.

For some, the arrival of these funds on Wall Street could help drive far more mainstream acceptance of the underlying crypto asset, given that over 10,000 projects have been built on the Ethereum blockchain.

Others, like Andrew Kang, founder of Mechanism Capital, believe that the funds may not be as successful as Bitcoin ETFs. According to Kang, Ether ETFs will likely attract 15% of the flows that spot Bitcoin ETFs have seen.

Read about other Ether ETF key date predictions:Ethereum ETF Key Dates Predicted Ahead of Trading Day Debut

Stay updated on Thailands first spot Bitcoin ETF:Thailand Approves First Spot Bitcoin Exchange-Traded Fund (ETF)

More:

ETF Store President Expects Ether ETF Launch Within Two Weeks - DailyCoin

Sun 07 Jul 2024 5 min of reading by Mikaia A.

Ethereum ETFs are about to get SEC approval, marking a major turning point in the crypto world. Even Gary Gensler, the SEC Chairman, seems to be in favor of this development. Discover how this approval could shake up the crypto markets and what it means for investors, according to John Glover, Chief Investment Officer at Ledn.

Even Gary Gensler, the SEC Chairman, is not against Ethereum ETFs. This says a lot about the evolution of cryptocurrency regulation. Gensler, known for his caution, recognizes the growing importance of crypto assets in the global financial system.

It seems that the era of Ethereum ETFs is imminent.

John Glover, Chief Investment Officer of Ledn, views this positively. According to him, the approval of ETH ETFs could not only legitimize Ethereum as an investment asset but also catalyze a new wave of institutional investments.

Glover highlights that the approval of ETH ETFs could attract new investors who were previously hesitant to enter the crypto market.

He also anticipates an increase in liquidity and price stability thanks to a better market structure.

Furthermore, he sees this development as a way to reduce the often-criticized volatility of cryptos.

This optimistic outlook comes with many expectations and fears.

If the approval of Ethereum ETFs materializes, it could very well mark the beginning of a new era where crypto assets are more seamlessly and securely integrated into traditional investment portfolios.

The arrival of Ethereum ETFs could significantly shake up the crypto ecosystem. John Glover explains that the impact of these ETFs on the market could be twofold.

Firstly, they could bring a new wave of legitimacy to Ethereum, encouraging financial institutions to invest. Glover compares this situation to the introduction of Bitcoin ETFs, which significantly increased institutional interest and Bitcoins price stability.

He believes that Ethereum ETFs could follow a similar trajectory, stimulating interest and confidence in Ethereum.

Secondly, Ethereum ETFs could improve market liquidity in the crypto space. Glover asserts that this could result in reduced price volatility, a point often cited by cryptocurrency critics.

With more liquidity, sudden and erratic price movements would become less frequent, making Ethereum a more stable and attractive investment for conservative investors.

Additionally, the increase in liquidity could facilitate large-scale transactions, making the crypto market more efficient.

Finally, Glover mentions that the approval of Ethereum ETFs could serve as a catalyst for other financial innovations in the crypto sector. For example, we could see the emergence of new financial products based on Ethereum, such as investment funds and more sophisticated derivatives.

This would help diversify and enrich the crypto ecosystem, attracting even more investors.

John Glover is adamant: the approval of Ethereum ETFs is good news for the future of Ethereum and the crypto market in general. According to him, this approval could trigger a series of positive market reactions. For instance, K33 Research predicts 4 billion dollars in inflows in just 5 months.

Firstly, it could reinforce Ethereums position as a safe haven in the crypto universe. Institutional investors, who have already begun to show interest in cryptocurrencies, might see Ethereum as a viable option to diversify their portfolios.

Glover also emphasizes that this dynamic could attract long-term investments, thereby increasing market stability. He predicts a rise in Ethereum prices in the medium and long term, once the ETFs are launched and adopted by the market. And this despite the recent declines of the crypto prince.

For Glover, the diversification of financial products based on Ethereum could also pave the way for greater innovation in the sector, with increasingly tailored solutions to the needs of institutional investors.

Maximize your Cointribune experience with our 'Read to Earn' program! Earn points for each article you read and gain access to exclusive rewards. Sign up now and start accruing benefits.

La rvolution blockchain et crypto est en marche ! Et le jour o les impacts se feront ressentir sur lconomie la plus vulnrable de ce Monde, contre toute esprance, je dirai que jy tais pour quelque chose

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

See original here:

Here's How Ethereum ETFs Will Disrupt the Crypto Market - Cointribune EN

Galaxy Digitals head of asset management believes spot Etherexchange-traded funds (ETFs) will be approved in weeks rather than days but agrees the decision will come sometime in July.

Look, weve done this before. This is methodical, this is window dressing, the SEC is engaged, said Steve Kurz in an interview with Bloomberg TV on July 2.

Galaxy Digital is one of eight asset managers with a proposed spot Ether ETF currently under review with the United States Securities and Exchange Commission. It is collaborating with Invesco on the ETF.

Kurzs estimate is largely in line with other ETF analyst estimates.

On June 28, Bloomberg ETF analyst Eric Balchunas pushed back his early July estimate for ETF approvals after the SEC took extra time to get back to applicants about their S-1 paperwork.

A July 2 Bloomberg report, citing two people familiar with the matter, added fuel to this theory, stating Ether (ETH) ETF applicants have been given until July 8 to submit updated paperwork to address some minor issues.

This could be followed by an additional round of filings, they said.

Eight bidders BlackRock, Fidelity, 21Shares, Grayscale, Franklin Templeton, VanEck, iShares and Galaxy/Invesco have already been given the green light to list their shares on their respective exchanges.

The issuers now need an approved S-1 filing for the Ether ETFs to go live for trading.

Related: How ETFs are reshaping the crypto markets

In a July 2 research report, K33 Research suggested Ether ETFs would be a golden egg for ETHs price and could even outperform Bitcoin (BTC) in the first weeks after it goes live.

K33 analysts Vetle Lunde and David Zimmerman expect Etherto stumble immediately following the launch of the ETFs but noted that, much like what happened with Bitcoin, inflows to the funds would likely bolster ETHs price.

Magazine: VanEck files for Solana ETF, Ether supply inflates, and more: Hodlers Digest, June 2329

Here is the original post:

Ethereum ETFs in 'window dressing' stage, approval in weeks Galaxy - Cointelegraph