Ethereum (quotation ETH) - the second largest cryptocurrency by market cap size - has seen a lot of positive activity over the past few days and weeks. According to CoinMarketCap.com, it is currently trading at $ 3.440,88 at press time, reflecting a nearly 15% rise in the past week and a 40% jump from March 7, when its price was 2.462,84. dollars. Additionally, its 24-hour trading volume last night increased 93%, compared to 71% for Bitcoin and 17% for Dogecoin, demonstrating a growing interest in ETH.
There are a few factors combining that are driving this price and volume action for Ethereum.
Great interest in the Ethereum merger
Ethereum developers have been working for years to move from the blockchain's original proof-of-work (PoW) consensus model to a greener proof-of-stake (PoS) method. This network upgrade is expected to exponentially increase the number of transactions per second the blockchain can handle, reduce congestion, accelerate settlement speed and lower transaction fees.
The merger of the PoW chain with the improved PoS blockchain was called ETH 2.0 and Ethereum Consensus Layer. However, it has recently been dubbed "Ethereum Merge". This name seems to be spot on, as Google Trend shows that searches for “Ethereum Merge” have increased by 300% in the past week.
The estimated date for the completion of the Ethereum merger is currently scheduled for this June or sometime in the third quarter. This could lead investors to "buy the rumors, and sell the news".
Ethereum's offering on cryptocurrency exchanges is a two-year minimum
However, buying the news will be difficult as the supply of tradable ETH on cryptocurrency exchanges has contracted. According to the on-chain analysis monitoring site Glassnode, the available supply of ETH on 18 different exchanges is currently 17,97% of the circulating volume, marking the lowest percentage available since March 21, 2022, when it was 28,54. %.
This suggests that investors have moved ETH off exchanges into off-chain cryptocurrency wallets for personal storage. Or, they locked it into decentralized financing (DeFi) businesses like interest-bearing accounts for cash or loan purposes. In fact, Glassnode shows that since January 9, 2022, the amount of ETH that has been blocked in DeFi projects has increased by 16,35% for a total blocked value (TVL) of over $ 220,42 billion.
Finally, the supply is further narrowed as a portion of each newly minted ETH is intentionally burned. This makes the currency more deflated and limits the supply in circulation. Since the launch of the Ethereum Improvement Proposal (EIP) -1559 last August, more than 2 million ETH has been burned, producing a net reduction in supply of 64% according to WatchTheBurn.com.
All of these constraints have created a supply squeeze that has pushed the price of the ETH coin up, and there is no indication that the supply will change. While every investor must conduct their own research, it is safe to expect this upward trend in prices to continue. At least until the completion of the Ethereum merger.