Since the implementation of the Merge upgrade, the Ethereum network has successfully burned nearly 30,000 ETH through its fee-burning mechanism. Recent surges in transaction fees highlight the network’s positive development trajectory and the smooth transition to its new proof-of-stake consensus model.
The introduction of the burn mechanism is performing as designed, signaling a shift toward a more sustainable economic future for Ethereum. Increased on-chain activity has driven the burn rate higher, underscoring the growing utility and adoption of the network.
This progress is especially timely with the approaching Shanghai upgrade, which is expected to enable ETH stakers to withdraw their previously locked assets.
Declining Ethereum Supply on Exchanges
According to on-chain data from Santiment, Ethereum has displayed encouraging market behavior since September 2022. Following the successful transition to proof-of-stake (PoS), the supply of ETH held on centralized exchanges has decreased by 37%.
The "exchange supply" metric tracks the total volume of Ethereum held in wallets associated with centralized trading platforms. An increase in this metric can indicate that investors are moving tokens to exchanges, potentially to sell, which may exert downward pressure on the asset’s price. Conversely, a decline suggests a net outflow from exchanges, often interpreted as a bullish indicator.
Santiment reported that on the day of the Merge—September 14, 2022—exchange supply stood at approximately 19.12 million ETH. Since then, the metric has dropped significantly, with only 13.36 million ETH remaining on exchanges today. This represents a 37% reduction in available sell-side supply since the Merge.
The continuous decrease in exchange-held ETH over recent months suggests that investors are choosing to hold or move their assets into private wallets for long-term keeping rather than maintaining liquid positions ready for sale. Santiment views this trend as a positive sign for Ethereum’s market outlook, noting that reduced selling pressure can support price appreciation.
This shift is particularly significant given Ethereum’s status as one of the largest cryptocurrencies by market cap. A sustained reduction in exchange reserves may signal growing confidence among holders and a potential supply squeeze if demand increases.
Overall, the declining supply of ETH on exchanges is an encouraging signal for the broader crypto market. With rising demand and diminishing available supply, Ethereum’s market structure appears increasingly favorable for the months ahead.
Ethereum Network Activity in Perspective
Despite increasing on-chain activity and a successful transition to PoS, Ethereum continues to face competition from other blockchain projects. A report from February 19 indicated that Ethereum ranked seventh in weekly GitHub development activity, with 361 commits. It trailed behind Polkadot/Kusama, Cardano, and Internet Computer, which led with 599, 523, and 434 commits, respectively.
Nevertheless, ETH traders have maintained an optimistic outlook on the cryptocurrency’s short-term prospects. As of February 19, Ethereum’s market sentiment registered at 61 on the Fear and Greed Index, indicating a state of “extreme greed.”
In terms of price action, Ethereum recently broke through a major resistance level amid this buoyant sentiment. The asset climbed to $1,674—a price level not seen since early November 2022, just before the severe market downturn that impacted the entire crypto sector.
The next significant resistance levels for ETH are positioned near $1,800 and the psychologically important $2,000 mark. A sustained break above these levels, particularly the $2,000 threshold, could signal the end of the bear market cycle and the beginning of a new bullish phase.
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Ethereum Market Statistics
- Current Price: $1,704
- Market Capitalization: $208.5 billion
- Circulating Supply: 122.3 million ETH
- Total Supply: 122.3 million ETH
- Market Rank: #2
Frequently Asked Questions
What is the Ethereum Merge?
The Merge refers to Ethereum’s transition from a proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS). This upgrade significantly reduced the network’s energy consumption and introduced a more efficient method for validating transactions and creating new blocks.
How does Ethereum burning work?
Ethereum’s burn mechanism destroys a portion of the transaction fees paid by users. This process, introduced in the EIP-1559 upgrade, reduces the overall supply of ETH over time, making the asset more deflationary as network activity increases.
Why is exchange supply important?
A decrease in exchange supply often indicates that investors are moving ETH to long-term storage or staking contracts rather than holding it for immediate sale. This reduction in readily available supply can reduce selling pressure and support price stability or growth.
What is the Shanghai upgrade?
The Shanghai upgrade is a planned Ethereum hard fork that will enable stakers to withdraw their staked ETH and accumulated rewards. This is expected to reduce uncertainty and encourage more participation in staking.
How does proof-of-stake benefit Ethereum?
Proof-of-stake enhances Ethereum’s scalability, security, and sustainability. It requires validators to stake ETH instead of using energy-intensive mining hardware, lowering entry barriers and reducing the network’s carbon footprint.
Can Ethereum’s supply ever increase?
While the burn mechanism removes ETH from circulation, new ETH is also issued as staking rewards. Whether the net supply increases or decreases depends on whether transaction fee burning exceeds new ETH issuance.
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This article is for informational purposes only and is not intended as investment advice. Readers should conduct their own research before making any financial decisions.