The anticipated benefits of Ethereum’s transition to Proof of Stake (PoS) have not materialized as expected, resulting in increased risks following a significant recent update. The feared outcome has arrived, with Ether’s supply chart showing an upward trend, a concerning development for long-term investors. Why is this trend problematic?

Why is Ethereum’s Supply Rising?

Ether, the largest altcoin, was expected to see its supply diminish due to the burning mechanism and the PoS transition, driving prices higher. However, this scenario didn’t unfold as anticipated. Since April 14, the circulating supply has steadily grown, contradicting the earlier narrative of a shrinking supply pushing spot prices to new peaks.

The rise in circulating supply hinders any potential increase in unit price. The combination of expanding supply and new demand means price hikes are essential. This supply growth also signals weakening network activity. User activity on the Ethereum network, which was around 611,000 on June 22, has dropped by 37% recently.

What Does Lower Network Activity Mean?

Daily transactions on the Ethereum network have decreased by 15%, falling from 1.3 million on June 22. With diminished network activity, the amount of burned Ether has also reduced. As the amount of ether entering circulation now surpasses the burn rate, the circulating supply is increasing, ending Ethereum’s deflationary narrative.

Key Inferences

• Increased Ether supply could deter long-term price growth.
• Ethereum’s weakening network activity may signal broader issues.
• Investors might need to adjust their expectations regarding Ethereum’s price performance.

ETH Price Prediction

Despite the ETF approval weeks ago, Ethereum has not performed as expected. The ever-increasing supply suggests that a higher risk appetite among investors is necessary. ETH’s price, currently at $2,720, has dropped by 15% in the past 30 days. Although the Relative Strength Index (RSI) and buy/sell demand are balanced, Bitcoin‘s fluctuations will be crucial in determining ETH’s direction.

If an upward movement occurs, ETH could reach $2,867. Conversely, in a downturn, $2,535 would be the target. Although the total volume increased by 10% compared to the previous day, standing at $60 billion, it remains insufficient for a strong upward trend.