When Justin Drake from Ethereum (ETH-USD) tossed out “ultra sound money” into the crypto-verse back in September 2020, he wasn’t just spinning words. He set the stage for Ethereum to potentially one-up Bitcoin (BTC-USD) in the financial stability game. The idea? Make Ethereum so effective against inflation that it wouldn’t just hold its value but see its supply shrink over time. Fast forward to The Merge in September 2022, and things looked up. Ethereum’s ETH supply decreased from 120.491 to 120.097 million—a subtle nod to those deflationary dreams.
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Post-Merge: Deflationary Delight or Dilemma?
On-chain analytics firm CryptoQuant did a fantastic deep data dive into Ethereum’s supply pre- and post-Dencun, one of the best on-chain reviews the crypto space has seen in a long time.
Ethereum’s switch to proof-of-stake during The Merge did work like a straight road to “ultrasound” glory. The total ETH supply started dipping, powered by more transaction fees getting burned than the new ETH being minted. It was all cheers and champagne… until it wasn’t. It turns out that this dip was more about high fee burns during peak transaction times than a steady deflationary trend. And just when Ethereum enthusiasts started getting comfy, the Dencun upgrade rolled in and threw a wrench in the works.
Dencun’s Double-Edged Sword
Before Dencun, high network activity meant more transaction fees burned up, which was great for keeping the ETH supply on the down low. But post-upgrade? That old link between bustling blockchain action and burning fees just… evaporated. Now, even with the network buzzing, the fees—and thus the burns—are down. Result? The ETH supply isn’t shrinking anymore. It’s growing. Again. And at a pace not seen since pre-Merge days.
Wrapping Up: Is “Ultra Sound Money” Still in the Cards?
Here’s the kicker: Ethereum’s current path might just turn the whole “ultra sound money” narrative into a nice idea that never quite materialized. Sure, the initial post-Merge phase gave us a glimpse of what could be. But with the Dencun upgrade recalibrating how fees work, Ethereum would need a hefty boost in network activity—or another clever tweak—to get back on the deflationary track. Whether Ethereum can truly become “ultra sound money” remains a big, fat question mark.
Is Ethereum A Buy?
According to TipRanks’ Summary of Technical Indicators, Ethereum is a Sell.
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