Hey guys welcome back, so it looks like there is a supply squeeze building for ethereum, and the good news is that any reductions in supply, all things being equal, does cause the price to increase. Now one of the great benefits of blockchain is that we get access to on-chain data, and this is data and analysis that are not publicly available for traditional payment rails. So in this video we’re going to be taking a look at what is going on with ethereum and i’m going to share five charts with what’s going on behind the scenes when it comes to supply and demand, then, when we combine all this with ethereum’s london upgrade, Which is happening today, as i release this video happy eip day and basically, what this all means, as you will see, is that this is all very bullish for ethereum. As always, if you do enjoy anything in the video drop, a like always appreciated. Now we always want to pay attention to what is going on with supply and demand, as this is the key factor that determines something’s price.
Okay, let’s begin here are five insights, going on behind the scenes with ethereum right now check it out number one: the supply on the exchanges. So here we have a chart showing the balance on exchanges here and overlaid is the price of ethereum here, and this goes back to the beginning of the year, and what it shows is that the balance on exchanges, so how much ethereum is being held on exchanges, Has been falling in the year and the main event for the year was this big crash. That happened around may time and what generally happens is that people begin moving their ethereum onto the exchange, so they can sell, which is a bearish sign and when they take money off the exchange. This is generally bullish as it’s going to things like hard wallets for long-term cold storage. So you can see in this crash people moved money on the exchange as the price crashed, but one of the main things to note from this chart is what’s happening recently.
So, in the last couple of weeks, people have been taking their money off the exchange, which is a bullish sign and just in the last couple of weeks, this has reduced by around ten percent number two, the supply in smart contracts. So this is the percentage of ethereum supply that is being locked away in smart contracts, and this is represented by this line in blue again. We’Re overlaying, ethereum’s price in gray and what’s interesting, is around this crash event in may. So, even though ethereum’s price did have a big crash, the percentage being locked away in smart contracts didn’t fall that much and has actually been steadily increasing and since the time of the crash, the percentage supply being locked away has now increased by eight percent number. Three.
The supply being staked away for ethereum 2.0, so this is the number of ethereum being locked away, and this is the blue line showing a steady increase all throughout the year overlaid with ethereum’s price and, interestingly, what happened around the crash time? There has just been quite a big increase, even through the crash now for most places once you’ve locked your ethereum away. You actually can’t get it back. So in this time of uncertainty, i thought this would begin to flatten out.
However, it’s just been charging forward through the crash, and this has increased by a huge 44 since the crash more supply being locked away. Number four: the supply impacts of the london upgrade and interestingly, the london upgrade is happening as i record this video and by now, you’re probably sick of hearing about eip 1559, as it’s been a long time coming. But the good news is that this is going live today, and the impact is that part of the base fee in every single ethereum transaction is going to begin to get burned, taking more supply out of circulation. So what is the actual impact of this? Well?
This is what i can find bit wise is haugen. He estimates that this will reduce ether’s overall inflation rate from roughly four percent a year to three percent, so reducing ethereum’s issuance approximately by 25. So you may have heard that this may make ethereum a deflationary asset, but i don’t think this is strictly true. I think what it’s doing is just reducing the ethereum issuance rate, but it still has quite a big influence on the supply and number five. The supply impact of ethereum 2.
, so talking about the ethereum issuance rate. This is going back to 2016 and, as you can see, the issuance rate was all the way up to the 12 to 15 mark. It has been coming down over the years. This is where we’re at today, where it’s around three to four percent, but one of the biggest impacts, reducing the ethereum supply is going to be ethereum 2.0 when it moves over to proof of stake at the end of this year, it’s going to have a dramatic Impact on ethereum’s issuance rate bringing it down to under one percent.
So although this won’t be happening for about six months, the market is always forward-looking, so this is bubbling away in the background and people will begin to anticipate this. So that was everything from the supply side. Now, let’s finish with the demand – and the main point is that the ethereum network is not just going sideways, it is in fact increasing, as you can see, there’s this really big ski slope, developing as the ethereum network continues to grow at a rapid rate and since The crash the network has grown a further 10, so what does this mean? Well, this works out to be 15 million. People have joined the ethereum network since the crash in may and when we add this together with fear and greed index, so it looks like the investor sentiment is beginning to change.
So i took this snapshot just about one week ago, and the market was saying we are in extreme fear, and then i took it again just the other day and it looks like market sentiment is beginning to change now, switching to neutral. So after the market crash in may, the dynamics for ethereum are really starting to change. Supply is getting reduced from multiple places, as demand for the network continues to grow and on-chain analysis is showing balances on exchanges recently dropped by 10 eth been locked away in smart contracts, has increased by eight percent. Eth been locked away for staking has increased by a massive 44 and with eip 1559 going live today. This will reduce the issuance by about 25, as the gas fees begin to get burned, and that was just the supply side.
However, adding fuel to the fire ethereum’s network continues to grow, adding millions of users increasing the demand on this shrinking supply. So what does this all mean? Well from an investment point of view, this is exactly what you want. You want a shrinking supply with increasing demand, so there you are guys that was the latest update for ethereum hope you enjoyed just to say then, if you did drop a like and a big thank you to everyone who does if you haven’t yet subscribed to the Channel then, click below to not miss a video okay cheers guys. Thanks for watching and i’ll see you in the next video bye for now, [ Music ], you
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