Ethereum supply is on an upward trajectory, potentially undoing the deflationary effects observed since the Merge. This trend could become a focal point for investors later this year, according to a recent analysis by the CEO and Founder of ITC_Crypto, Benjamin Cowen.
Cowen’s in-depth examination, posted on July 19, reveals that Ethereum’s supply has been increasing by approximately 60,000 ETH per month since April. If this rate continues, the total supply could revert to pre-Merge levels by Dec. 2024.
The analysis highlights that while Ethereum’s supply had decreased by about 455,000 ETH since the Merge as of April 2024, it has since increased by roughly 150,000 ETH in the last three months. At the current pace, it would take only five months to completely negate the post-Merge supply reduction.
Cowen suggests that this supply trend could become a significant narrative in the crypto market later this year. However, he emphasizes that investors should focus more on broader monetary policy implications rather than solely on supply dynamics.
Parallels with Ethereum historical market patterns
The expert also draws parallels between the current market conditions and historical patterns. He points out similarities with 2016, when the ETH/BTC pair experienced a fakeout below its lows in Q2, followed by a real capitulation in Q4 of the Bitcoin halving year.
Cowen suggests a similar trend may happen this year, foreseeing ETH/BTC’s potential final decline starting around Sep. 2024. This estimation coincides with the possible fading appeal of the Bitcoin spot ETF and aligns with historical trends in Bitcoin dominance during halving years.
Interestingly, Cowen points out the resemblance between the 2024 ETH/BTC performance and the average from 2019 to 2020. This observation leads him to consider the notion that both the monetary policy perspective and the four-year cycle theory may hold true.
Cowen’s thorough analysis comes with a word of caution for readers: he admits to frequent errors in his predictions. Despite foreseeing potential dips for ETH/BTC in the short term, he remains optimistic about its long-term growth prospects, expecting an upward trend in 1.5 years.
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