Ethereum, the popular cryptocurrency, is witnessing inflation for the first time in one and a half years since its system upgrade known as the Merge. Following the recent Dencun upgrade, which took effect two months ago, Ethereum’s Ether supply has officially stopped being deflationary. The total Ether supply rose from 120 million on March 12 to 120.1 million on May 7, according to data from CryptoQuant.
The minimal upswing indicates the first inflationary period for Ether since September 2022. During that time, Ethereum underwent the much-anticipated Merge, which shifted it to a proof-of-stake consensus model. Notably, this rise and fall of Ether’s deflationary status do not significantly impact Ethereum as its key strengths lie in its Decentralized Applications (DApps).
Since the Merge on September 15, 2022, which introduced a mechanism to permanently burn transaction fees, Ether supply initially became deflationary. Following this, over 419,713 Ether tokens were eradicated or permanently withdrawn from circulation. However, the Dencun upgrade has seen Ether resume its inflationary streak by significantly reducing median transaction fees.
CryptoQuant alludes that this upgrade may doom Ether’s ‘ultra-sound’ money status. The reduced transaction fees mean fewer Ether is being burned, thus, resulting in a growth in supply—the highest level since the Merge upgrade—rather than maintaining a deflationary trend.