Another crucial outcome of The Merge was Ethereum’s shift towards a deflationary model. This shift was initiated by the implementation of EIP-1559 during the London hardfork in August 2021, which involved burning a portion of transaction fees. According to data by Ultra Sound Money, the reduction in new coin issuance accelerated after The Merge, leading to a decrease in Ethereum’s supply by more than 300,000 ETH.<\/p>\n
However, while the deflationary nature of Ethereum is expected to drive up demand and potentially boost its price, Ethereum’s relative value, compared to Bitcoin, has faced challenges, declining by approximately 25% over the past year.<\/p>\n
Notably, Ethereum’s price, when paired with Bitcoin (still a Proof-of-Work coin), has shown a pattern of lower highs and lower lows, as highlighted recently by Benjamin Cowan, Founder and CEO of ITC Crypto.<\/p>\n
\u201cYou may notice that ETH \/ BTC tends to lose its support levels on BTC rallies. Many say that ETH\/BTC is \u201cholding up well\u201d but it is still a series of lower highs and lower lows since the merge Supply-based models (but it\u2019s deflationary!) do not tell you anything about demand.\u201d<\/em> Cowan wrote on X, Thursday.<\/p>\n Moreover, Ethereum has experienced a shift in dominance within its ecosystem, particularly toward liquid staking protocols. The PoS transition allowed users to participate in staking with smaller amounts of ETH, leading to a surge in liquid staking, with approximately 10% of the total Ethereum supply, equivalent to 11.96 million ETH, now locked in platforms such as Lido Finance.<\/p>\n However, this shift towards liquid staking has raised concerns about centralization within the network exerting downward pressure on the ETH\/BTC price. That said, while there\u2019s a general improvement in the ETH\/USD price with the price creating higher highs, it will be hard to tell when the former will find a bottom, considering the aforementioned concerns.<\/p>\n![\"\"\/](\"https:\/\/lh6.googleusercontent.com\/y0qH8_NGL-OgrZP3Q9baCAs7CknVlUahS2_YgiijfWMxFwoeClioUL_ZKwSZH7OuE3muIGjZ2dbJEJQnSBnsw8mWPV1qbL4mYGiJBJVeB_ZSYEtcf5pahJq0ApCu4WyvFWXOCrBwm_Kx4kuytWDjVg\")