Ethereum (ETH) Sets a New Deflation Record; Here’s Why

Ethereum (ETH), the second largest cryptocurrency by market capitalization, has been in a deflationary mode for more than 48 hours, an unusual occurrence in a weekend market. This is the first time Ethereum has behaved in this manner, and it is mostly linked to a series of network launches that produced a surge in activity.

There are further triggers on the network that could drive additional activity in an environment where ETH activity is already high, such as the imminent debuts of the Arbitrum and MATIC zkEVM, as well as the BLUR and SUDO token drops.

ETH now been deflationary for over 48 hours straight, even on a random weekend night. Don’t think I’ve ever seen that before. https://t.co/UsZtzAI0N4 pic.twitter.com/JpA67OIhXy — Hal Press (@NorthRockLP) February 4, 2023

However, the cryptocurrency market is notorious for its volatility; just two months ago, Ethereum lost a substantial portion of its network activity and became inflationary again, causing investors to be concerned. The deflationary characteristic of Ethereum was projected to be the primary driver of ETH price in the future, and any divergence from this tendency is likely to effect ETH price.

Aside from the recent deflationary episode, Ethereum’s price has been consistently growing in recent weeks. However, the market is exhibiting indicators of reversal, such as a falling RSI, low trading volume, and decreased volatility. Nonetheless, the possible market recovery is still in its early stages, and it is critical for investors to take a long-term perspective, given the losses that some investors must cover.

At the time of writing, Ethereum is approaching the $1,700 price mark, which it failed to break a few days ago. Unfortunately, with the aforementioned indicators of reversal, we may witness yet another failed breakout attempt, which could result in a larger fall than some pessimistic experts had predicted in recent days.

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