Citibank said that after the success of the Merge upgrade, the volatility of the Ethereum (ETH) cryptocurrency fell to historical lows.
In a research report published by Citibank, the most significant impact of the Ethereum blockchain’s transition to Proof of Stake (PoS), a process known as Consolidation, is the change in net Ethereum supply approaching zero. The report noted that prior to the Merger, the supply remained stable at 2 ETH per block, which led to annual supply inflation of around 4.2%. After the merger, the supply of proof-of-work (PoW) stopped, leaving only the supply of staking returns.
Merge was the first of five planned upgrades for Blockchain and included the move from PoW to a more efficient PoS consensus mechanism.
Analysts led by Joseph Ayoub gave the following opinion.
“Ethereum appears to be moving towards a deflationary future as it exhibits periods of deflation amid low network activity”
Citibank states that the move to PoS has removed about 564,000 ETH from circulation in the six weeks since the Merger, compared to the fact that PoW supply is still happening. In US dollars, this figure corresponds to approximately 870 million dollars.
Recent moves in Ethereum price appear to be driven by derivatives markets. It is stated that the interest in question has risen to the highest levels since April, when the cryptocurrency was trading at around $3,000.