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Will ETH be deflationary after the Merge?

Most of what crypto analysts and the Ethereum foundation had estimated prior to the Merge, has come true with Ethereum shifting issuance post Merge. Although the issuance of ETH has decelerated significantly, it remains an inflationary asset day after the launch of the long-awaited Merge.

Will ETH be deflationary after the Merge?
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As of this moment, the amount of ETH in circulation has increased by over 5,990 ETH since the launch of the Merge on Sept 15th. That's almost $8 million worth of ETH, based on current exchange rates, has been placed into circulation.

By this we do not mean that the Merge has not made a significant change but only to imply that the investors are still waiting for the asset to become deflationary and its supply to expand.

Since the Merge, once every 12 seconds new ETHs are staked and added to the network and this is called a block subsidy.

Alongside that, a certain amount of ETH is burned through gas fees, increasing the amount of burn rate and fees. 

See also: ETH price

If Ethereum is to become deflationary, the number of tokens being burned by the network should be higher than those generated on the block subsidy, meaning that the number of transactions by ETH must be higher than the number of staked ETHs. 

As more people enter the staking market, inflation may increase. Currently, the Ethereum network offers stakers an annual percentage rate (APR) of about 4.5% in ETH. Up to 6% in staking incentives are now being offered by staking providers like Binance.US.

However, people who anticipate Ethereum to develop into a high-volume network for decentralized trade may anticipate higher transaction costs, which would increase the burn rate and drive ETH issuance towards a deflationary zone.

Want to buy ETH? Visit: buy and sell Ethereum

Inflation is still evident in ETH as of this writing because less Ethereum is being generated than is being destroyed through fees.The price of Ethereum has also been negatively impacted by the declining supply. According to statistics collected from CoinGecko, the native token has decreased 22% after the Merge.

 





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