• Ethereum’s deflationary model could add bullish tailwinds for its token.
• ETH price has formed a bullish continuation pattern called the ‘Bull Flag’, which has an 80% price target.
• Ethereum introduced a fee-burning mechanism to make ETH deflationary, and the total circulating supply of ETH is expected to start declining around May 2024.
Positive Impact of Ethereum’s Deflationary Model
Ethereum (ETH) might be heading for bullish waters soon, thanks to the prime altcoin’s burn mechanism turning ETH deflationary. Per data from Ultrasound.money, the ETH supply rate has been negative since early 2023, underscoring the deflationary pressure on the token. A negative supply rate implies that Ethereum is burning more tokens than it creates in a particular time frame. After Ethereum’s transition to the proof-of-stake consensus mechanism, the ETH supply rate became deflationary for the first time in Oct 2022. This could have a positive impact on its token prices as there will be less circulation of Ether tokens in comparison with other cryptos in market leading to bullishness in prices.
Bullish Continuation Pattern Formed by ETH Price
The crypto asset has formed a bullish continuation pattern called ‘Bull Flag’. It consists of a flag pole resulting from near-vertical rise in crypto token prices followed by consolidation period forming flag of pattern and finally breakout from this flag resulting into powerful uptrend for asset prices according to technical analysis rules. The price target of breakout can be calculated by adding length of flag pole with breakout price level which gives us 80% increase in ETH token prices once this pattern confirms itself. Independent market analyst Christopher Inks tweeted about ETH price forming this bull flag and mentioned potential price surge if this formation completes itself based on technical analysis rules..
Ethereum Introduces Fee Burning Mechanism To Make Token Deflationary
Ethereum had no limit on number of tokens before it introduced EIP-1559 upgrade but after introduction of fee burning mechanism it started becoming deflationary after its transition to proof-of-stake consensus mechanism which happened back in October 2022 .A spike in gas fees due memecoin frenzy further increased fee burning rate resulting into higher net burn rate at current staker issuance reward and burn rate,thus making total circulating supply start decreasing around may 2024 as predicted by Ultrasound money with yearly net burn and issuance expected to be around 726000 Ether tokens after equilibrium level is reached .
Potential Increase In Prices As Bull Flag Formation Completes
As per independent analyst Christopher Inks tweet ,if this bull flag formation completes itself then we can expect 80% increase in eth token prices once this formation confirms itself based on technical analysis rules .This could lead ethereum back into bearish waters ,resulting into higher investor confidence among people investing or trading ether tokens leading towards their increasing demand and thus higher return for investor community .
Conclusion
With ethereum transitioning into proof-of stake consensus mechanism last year along with introduction of fee burning mechanisms ,it started becoming deflationary leading towards lower circulation rates compared to other components thus resulting into higher potential return rates once bull flag formation completes itself .