EthHub Founder, Into the Ether Podcaster: Ethereum’s ETH Issuance is Dropping, Prices Could Rise
In a recent tweet uploaded by Eric Conner, the founder of EthHub, he mentions that the rate of issuance of new Ether (ETH) is at its lowest point ever. The main question that everyone is asking whether this supply reduction could lead to higher ETH prices in the future.
— eric.eth (@econoar) February 4, 2019
The first thing that it is important to take into account is ETH’s demand. If it remains constant or increases in the future, ETH could eventually experience a price increase. At the same time, if there are a new bull run and the demand for ETH increases, then the price could skyrocket much faster than in previous bull markets.
Clearly, an automatic reduction in the issuance of ETH does not mean that the price will start to grow immediately after. These are processes that take several weeks or even months to have the desired effect.
The future hard fork that Ethereum is going to experience, called Constantinople, aims at reducing block rewards from 3 ETH down to 2 ETH. This decision to reduce the new supply of ETH is related to the intention of moving toward a proof-of-stake (PoS) consensus algorithm in the future. The upgrade was scheduled for October 2018 but delayed for January 2019. Now, the new date for the hard fork is February 27.
The Constantinople upgrade will also allow Ethereum to be prepared for the Casper update that is going to take place int he future. The network will not only be moving towards a PoS consensus algorithm but it will also be trying to improve its scalability and process more transactions per second.
Back in December 2017, when Bitcoin (BTC) was reaching an all-time high and weeks before Ethereum reached $1,400, the network was completely congested. Transactions could take several hours to be processed and the fees were very high. The congestion happened due to the fact that there were several individuals using decentralized applications (dApps) running on top of the Ethereum network. Perhaps one of the most popular apps at that time was CryptoKitties.
With a lower issuance of ETH and better services for decentralized applications and users, the price of Ethereum can certainly start to grow in the future. At the time of writing this article, Ethereum is being traded around $107 and it has a market capitalization of $11.29 billion. With a supply reduction and a bull market, Ethereum might be able to recover the second position in the market and surpass XRP as the second largest digital asset.