Ethereum supply shrinks, showing signs of an imminent rally as more ETH gets burned

Leon Waidmann, a senior researcher at OnchainHQ, believes Ethereum is on the verge of a rally. The analysts cite strong fundamentals, such as Ethereum’s current deflationary mechanism to support the imminent ETH upsurge.

As the broader crypto ecosystem continues to rise amid the reigning bullish investor sentiment, Ethereum has caught the eye of Leon Waidmann, a senior researcher at OnchainHQ.

According to Waidmann, Ethereum is about to begin a rally as the bull market continues to gain momentum. Waidman believes ETH is back to deflationary territory and suggests that more Ether supply has been burned than the supply issue. The researcher expects the trend to continue as the crypto market soars.

Waidmann believes Ethereum is in bullish territory

Ethereum is heating up, and ETH supply is shrinking! 🔥

🔹Back in deflationary territory with more ETH burned than issued.

🔹As the bull run gains momentum, expect this trend to accelerate.

✅The bullish flywheel is activated, and here’s what it means for ETH 👇

➡️ Higher… pic.twitter.com/NJD0rCNtB5

— Leon Waidmann | Onchain Insights🔍 (@LeonWaidmann) November 13, 2024

Waidmann wrote that Ethereum’s bullish flywheel has been activated. He said Ethereum’s increased user count and rising gas fees could lead to more ETH burns, reducing the asset’s overall supply. The reduced supply creates scarcity that causes ETH’s prices to increase.

Leon Waidmann also believes the price increase will attract more users, projects, and investors, fueling more on-chain activities on the smart contracting platform. The activity surge will lead to more fees generated and, thus, more ETH burned.

Waidman terms the process as a self-sustaining cycle. The cycle involves increasing ETH demand, burning ETH, and price appreciation, which creates a positive feedback loop that catalyzes the ETH price upsurge even more. The cycle aligns with the broader bullish outlook in the crypto industry, making Waidmann believe ETH is undervalued and the asset’s price could increase.

According to crypto data aggregator CoinMarketCap, ETH is trading at $3,149, having shed 4.32% in the last 24 hours. However, the asset is up 20% in the last seven days. As of this publication, ETH has a market cap of $379 billion and a 24-hour trading volume of $48 billion.

Ethereum Foundation offloads ETH for DAI

Data from Spot Onchain shows the Ethereum foundation sold 100 ETH for 252,491 DAI on October 23. On November 12, the foundation sold another 100 ETH for 334,315 DAI, marking the first transaction after the foundation announced its 2024 report on November 8. 

The report shows that the foundation has $970.2 million in asset reserves with $788.7 million in crypto, out of which 99.45% is in ETH as of October 31. The foundation’s non-crypto assets and investments cumulated to $181.5 million.

The entire Ethereum ecosystem has treasury reserves worth $22.2 billion overseen by organizations, foundations, and DAOs. The Foundation manages 4.4% of the total reserves. The ecosystem deployed $457 million in funding between 2022 and 2023. The foundation contributed $240.3 million, which is more than half of the amount deployed.

The Ethereum Foundation intends to sell ETH regularly to fund key public projects and maintain reserves. So far this year, the foundation has sold 4,066 ETH worth $11.22 million for an average of $2,760. The tally includes September and October sales that yielded the foundation $3.07 million.