Ethereum's highly anticipated Pectra upgrade was released yesterday and is already beginning to affect the supply dynamics of the network. On-chain data reveals sharp flooding in the circulation supply of coins, and is currently at 18 days' low.
This supply crunch is driven by a surge in user activity in Layer-1 (L1) networks over the past day. If this trend continues, ETH prices could skyrocket to new highs.
Ethereum Supply is low for 18 days
ETH distribution supply has declined since the Ethereum Pectra upgrade was implemented on Wednesday, according to UltrasoundMoney. At the time of this writing, it is at the 18-day low of ETH of 120.69 million.
ETH circulating supply. Source: UltrAsoundMoney
This much-anticipated network overhaul will raise validator limits to 2048 ETH, enable smart wallets, increase network efficiency, drive a surge in network activity, and tighten ETH supply as user demand rises.
GlassNode data shows that Ethereum's active address count has risen to a 30-day high, updating user engagement. According to the data provider, on May 7th, the total number of unique addresses active in the network as senders or receivers was 474,044.
The number of ETHs of the active address. Source: GlassNode
As Ethereum's active address count increases, a more unique wallet interacts with the network. A surge in user activity indicates an increase in demand and network usage, often correlated with increased gas prices and increased ETH burning.
This is because as more users on the network, more transactions flow through the network, causing higher gas prices and accelerated ETH burn rates. According to Etherscan, ETH burn rates have been at the highest level since it began in May.
The ether was burning every day. Source: Etherscan
As more ETH coins burn, the circulation supply decreases and the upward pressure on the price of Altcoin increases.
Will you regain $2,000 or retreat to $1,744?
On the daily charts, ETH traded beyond the horizontal channel and took on prices from April 23rd to May 7th. During that period, AltCoin faced resistance at $1,872 and found support at $1,744.
If the breakout continues, ETH can regain its psychological $2,000 price range and continue its rally towards $2,235.
ETH price analysis. Source: TradingView
However, this breakout retest could potentially reduce the price of ETH to $1,744. If not retained, the price could drop to $1,564.
