Bitcoin Jumps, Ether Hits Record High On Deflationary Issuance, Futures News

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by Tyler Durden
Tuesday, Nov 02, 2021 - 12:40 PM

A day after headlines on Stablecoin regulation were expected to shake confidence (but in fact do the opposite), cryptos are extending 'Uptober' gains overnight, pushing the total crypto market cap above $2.6 trillion...


...with Bitcoin spiking $1500 this morning, back above $63,000 (and up over $105% YTD)...

Source: Bloomberg

As it appears 'Whales' have been buying the dip in bitcoin:

But Ethereum is making the headlines as it spikes above...

Source: Bloomberg

To a new record high...

Source: Bloomberg

While catalysts for the move are numerous, some are pointing to the fact that the Ethereum network has seen its first consecutive week of negative supply issuance as bubbling markets drive persistently high transaction fees.

As CoinTelegraph reports, with the highly anticipated London upgrade introducing a burn mechanism into Ethereum’s fee market in early August, a small quantity of Ether (ETH) has since been destroyed with every transaction executed on the network.

With gas prices sustaining at high levels, Ethereum has seen seven consecutive days of deflationary issuance for the network, meaning that more ETH has been removed from supply than created through mining. In order for Ethereum to consistently produce deflationary blocks, gas prices must consistently remain roughly above 150 gwei.

EthHub co-founder Anthony Sassano commented that deflationary Ethereum was not expected until “the merge” — when the Ethereum blockchain is set to merge with Ethereum 2.0’s Beacon Chain, which is currently expected to occur during the first half of 2022.

According to the Ultrasound.Money fee burning tracker, around 15,000 ETH ($65 million at current prices) is being burnt daily. When factoring in the rate of new ETH being created, Watch the Burn reports a weekly net issuance of minus 8,034 ETH (roughly $34 million) at the time of writing.

Ethereum is likely also buoyed by news that CME will expand its crypto offerings to Micro Ether Futures (sized at one tenth of one ether).

CME launched ether futures in February and more than 675,500 contracts have traded to date and micro ether futures are scheduled to launch on Dec. 6, pending regulatory review.

For now, ETH is outperforming BTC having found support at around 0.06x...

Source: Bloomberg

Finally, as Goldman recently noted, the local backdrop looks supportive for Ethereum as "it has tracked inflation markets particularly closely, likely reflecting the pro-cyclical nature as "network based" asset." And, as Rzymelka notes, "the latest spike in inflation breakevens suggests upside risk if the leading relationship of recent episodes was to hold."

All of which suggest significant further upside for Ethereum.