Why the Recent Surge in Meme Coins is a Game Changer for Ethereum's Supply Growth
If you're following Ethereum and crypto in general, then you probably already know about EIP1559 and the switch to Proof-of-Stake for Ethereum. And of course, you all have also heard of the recent pump of meme coins such as PEPE, etc...
First off, let's talk about the Merge. Since the merge, Ethereum has experienced an average supply growth of -0.24% per year. That's pretty impressive, considering that just a year ago it was averaging around 3.28% inflation per year. Plus, with the ability to stake ETH now, the potential ROI might be even higher (if you are willing to stake it using third parties or own 32 ETHs yourself).
By the way, all the numbers that I am pulling up for the ETH Supply change you can look up yourself on ultrasound.money to check them yourself.
But let's get to the interesting stuff. The surge in meme coins, like PEPE and others, has really driven up activity on the ETH blockchain. And as we all know, ETH is burned with every activity that occurs on the network. However, issuance remains largely unaffected by activity levels.
I am not seeing many people talking about the current effects on the supply of ETH, which are absolutely exceeding expectations.
FOR THE LAST WEEK ETH has had a supply growth of -2.43% annually. So, if ETH continued to have the same activity level as it did last week for an entire year, we would have -2.43% less ETH at the end of the year.
Now, compare this to the average of -0.24% per year since the merge (234 days ago). The recent meme coin hype has managed to 10x the current deflation rate for ETH. This is honestly mindblowing in my opinion.
Now imagine if there's another bull run or hype phase (NFTs, DeFi, Altseason, etc.) similar to 2017 or 2021, we might see these phases last for months. This would have a tremendous effect on the ETH supply and might seriously decrease the overall deflation for ETH.
The merge and EIP1559 have brought new dynamics for ETH to the market, and we may not yet understand the full effects they will bring. But one thing is clear: the tokenomics for Ethereum at the moment are absolutely worth keeping an eye on.
Let me give you an additional easter egg: If you filter the supply growth to just one day, you'll see that we're currently above 3% (3.22%) deflation rate. That's even more amazing if you ask me.
So, what do you think about this? I have not seen many discussions about this even though it seems very interesting. Let's discuss this and hear your opinions.