Ethereum miners are dumping 30,000 Ethereum, blocking the deflation narrative of ‘ultrasonic money’

Ethereum’s shift to Proof of Stake (PoS) on September 15th failed to extend Ether (ETH) bullish momentum as ETH miners added selling pressure to the market.

On the daily chart, the price of ETH fell from around $1,650 on September 15 to around $1,350 on September 20, a drop of about 16%. The ETH/USD pair fell in tandem with other cryptocurrencies, including Bitcoin (BTC), on fears of a rally in Federal Reserve rates.

ETH/USD daily price chart. Source: TradingView

Ethereum keeps swelling

The drop in the price of Ether on September 15 also coincided with an increase in the supply of Ethereum, albeit not immediately after the merger.

Nearly 24 hours later, the show’s change-over turned positive again, pouring cold water on the “ultrasonic money” narrative due to the deflationary environment some post-merger proponents had predicted.

Prior to the merger, Ethereum distributed about 13,000 ETH per day to Proof of Stake (PoW) miners and about 1,600 ETH to point-of-sale validators. But the rewards given to miners after the merger began fell by almost 90%.

Meanwhile, validators receiving Ether rewards now receive only 10.6% of the previous amount. As a result, annual emissions of ether have fallen by about 0.5%, making ETH less inflationary, and possibly deflationary under certain conditions.

However, the supply of ether increased at an annual rate of 0.2% after the merger, according to data provided by Ultrasound Money.

Ether supply rate after merging. Source: Ultrasound.Money

The main reason behind the increased supply is the lower transaction fees.

Notably, Ethereum made a change to its protocol in August 2021 that introduced a fee-burning mechanism. In other words, the network has begun to permanently remove part of the fees it charges for each transaction. This system has burned 2.6 million ETH since its launch.

The data shows that the gas fee for the Ethereum network should be around 15 Gwei to offset the ETH that was rewarded to validators. But the average fee was about 14.3 Gwei on September 20, which means that the supply of ETH, in general, is increasing.

Ethereum gas fee for supply. Source: Ultrasound.Money

However, the rate of ETH issuance after the merger has declined, although the supply rate remains positive with nearly 3,700 ETH minted after the merger so far.

Miners add to the pressure of selling Ethereum

In addition, the drop in the price of Ether after the merger comes after the mass exit of Ethereum miners from the Ethereum market.

Related Topics: Will Ethereum Merge Offer a New Destination for Institutional Investors?

Miners sold about 30,000 Ethereum (about $40.7 million) in the days before the Ethereum POS update, according to data provided by OKLink.

ETH miner address balance. Source: OKLink

The analyst, who goes by the pseudonym “BakedEnt.eth,” notes that miners’ ETH sell-off has offset the impact of the slowdown in Ether issuance.

“The merger was in effect for a few days, but many failed to see the impact of the 95% daily issue reduction of $49,000 in ETH in 4 days.” Wroteadding:

“The miners were selling relentlessly at this drop and dumped over $30,000 worth of ETH in the same time frame.”

ETH price is now risking an additional $750 drop in light of the current macroeconomic headwindswhich puts pressure on risky assets across the board.

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