It has been just a little greater than a month for the reason that Ethereum merge and one in every of the large changes that investors were looking forward too has now taken place: ether has grow to be a “deflationary” asset. In crypto terms, that implies that the provision of ether is now decreasing somewhat than increasing. But while many investors hoped that may push the cryptocurrency price higher (assuming there was no change in demand), it hasn’t yet happened in a major way. Despite basic supply and demand dynamics on the network, the macro backdrop still has a powerful hold on crypto prices. “Theoretically speaking, if we see a deflationary environment then there must be upward pressure on the value, but there are other aspects that affect the ether price,” said Owen Lau, an analyst at Oppenheimer. “These tokens are still correlated with equity prices, with the macro environment. That really has a bigger impact on the value currently than supply and demand.” Things could reverse Plus, he added, there is a probability that things could reverse, and the digital asset could grow to be “inflationary” again. The value of ether has been barely lower for the reason that post-merge sell-off in mid-September. As of Tuesday afternoon it was down about 4% over the past month and the identical amount on a month-to-date basis. The availability of ether decreases when the quantity of ether “burned” on the network, or destroyed and removed permanently from circulation, is larger than the quantity being created. The burn function is a “scarcity engine fueled by Ethereum’s transactional utility,” based on data provider Ultrasound Money. Last week, gas fees, or transaction fees, were high, likely in consequence of upper traffic on the network. Ethereum uses those gas fees to burn tokens, so with higher fees the network had more cash to burn. “We do not know when the Fed will pivot, we do not know the subsequent CPI number, but there are some network specific things that might change the value,” Lau said. “If there are more use cases built on top of Ethereum, that may support the ETH price,” he added. “If there’s one other big NFT launch or a giant sale they usually’re using ETH to be the medium of exchange, that might increase the demand as well. We just do not have all these catalysts, it looks like we just haven’t heard about them aside from the merge itself.” Staked ether has been increasing. Sooner or later if the staked ratio goes high enough, then this deflationary scenario could actually turn back to inflationary. High gas fees can at all times come down nevertheless, Lau said, and that may mean the network would have less ether to burn. “Sooner or later, in case you burn less ETH but at the identical time people stake more, then you may see the network cross one other equilibrium where the online supply would increase,” he said. “It could grow to be an inflationary asset… This case may not last without end.”