ETH Ethereum ETH2 Burn Gas Fee

Gas Fee Burning! Can Ethereum Become Deflationary & SoV?

ETH Ethereum ETH2 Burn Gas Fee
After the ‘London’ hard fork upgrade, Ethereum 2.0 implements the gas fee burning mechanism. The deflationary mechanism is turning Ethereum (ETH) into a Store-of-Value (SoV) asset to hedge inflation – just like Bitcoin (BTC)!

In August this year, Ethereum 2.0 implemented the EIP-1559 proposal, introducing a gas fee burning mechanism. The network is burning the basic gas fee in ETH, instead of paying the fee to miners.

The Ethereum gas fee burning mechanism has a significant effect on reducing the circulating supply of Ether. On October 27, the difference between the number of tokens issued and destroyed turned negative for the first time. The trend has lasted for 4 consecutive days.

Within the period, the actual circulation of Ether decreased by 8571.24 ETH. Thereby, Ether has recorded a net decrease in ETH token supply.

According to ultrasound.money, as of November 3, Ethereum has burned more than 740,220 ETH. In a year, the Ethereum network will destroy 3 million ETH. Meanwhile, the new token issuance would be 5.4 million ETH.

Additionally, after merging with the current chain in 2022, Ethereum 2.0 will deploy the Proof-of-Stake (PoS) consensus mechanism. This will make Ethereum to be “completely deflationary” in ETH token supply. According to analysts’ estimates, the ETH supply will start to decrease.

Goldman Sachs’ ETH Price Prediction by 2021

Hong Hao, BOCOM International’s chief strategist – investing guru in Hong Kong and mainland China – shares his perspective on Ethereum on China’s social media Weibo. “Traders have begun to trade Ethereum under the perspective of using ETH to hedge inflation. The larger the transaction volume, the more ETH being burned. This mechanism is turning Ether into a natural inflation hedging asset.”

Investment bank giant Goldman Sachs recently provided the 2021 target price of Ether. According to the report, Ether may rise to US$8,000 in the next two months – by the end of 2021. Also, Goldman Sachs regards Ether as a suitable asset to hedge against inflation!

According to Goldman Sachs, rising inflation in the world economy will cause the value of cryptocurrencies to soar. And, besides Bitcoin, Ether can be used to hedge against inflation.

Recently, institutional investors’ interest in Ether has increased significantly. The Chicago Mercantile Exchange (CME) announced the launch of a Micro Ether Futures contract on December 6. Similar to the Micro Bitcoin Futures contract, Micro Ether Futures is with the size of 1/10 of 1 Ether.

In December 2017, CME launched Bitcoin futures – during that period, Bitcoin’s prices surged and then plummeted. This February, CME launched Ether Futures, with a size of 50 ETH per contract. Three months later, CME launched Micro Bitcoin Futures with a size of 0.1 BTC per contract. Micro Ether Futures will become the fourth crypto derivative CME issued.

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