According to the latest data, the daily burn rate of Ethereum (ETH) is close to exceeding the rate at which new tokens are minted. As the supply of ETH tokens becomes limited, an increase in ETH price may be seen.
The recent surge in ETH burning appears to be due to increased NFT activity. The Ethereum blockchain is the largest platform for NFTs, which are usually minted by burning ETH. Despite recent losses, ETH is still up 20.6% last month. Much of these gains are attributed to increased attention ahead of a widely anticipated upgrade.
Data from crypto researcher IntoTheBlock shows that the net daily issuance (print/burn rate) of ETH has recently reached a two-month low of 0.87%. The level falling below 0 will put ETH in the deflationary zone.
The last time a consistent negative net issue in the token was in a week in January. During this time, the price of the token rose by as much as 10%. While broader market weakness eventually bought the token, it still saw a nearly week-long rally.
Recent data from Dune Analytics showed that trade volumes on the NFT marketplace OpenSea exceeded $100,000 for six consecutive days. This indicates an increasing demand for ETH-based NFTs. The daily burn rates of the token were also rising steadily from late March to early April.
By comparison, ETH's hashrate has remained stable at around record highs for most of the year.
ETH is expected to switch to a PoS model this year. The move will reduce the token's computing and energy requirements, making it more accessible to investors. This is expected to generate more capital flows into the token, especially from institutional investors.
With the prospect of a PoS shift already pushing the token rally to over 20% by March, Wall Street giants like Goldman Sachs are trying to offer ETH-linked derivatives.