Ether (ETH), the native cryptocurrency of the Ethereum network, recently surpassed the $1,250 resistance level, demonstrating renewed momentum despite broader market turbulence. Although the digital asset faced selling pressure over the weekend, it continues to present a compelling investment case for both short-term traders and long-term holders.
Ethereum Outperforms Bitcoin and Traditional Assets in October
According to a market analysis report published in mid-November, Ethereum posted impressive gains of 18.4% throughout October. This performance notably outpaced Bitcoin, which saw a more modest 5.49% increase during the same period. Ethereum also outperformed major stock market indices, reinforcing its position as a leading digital asset.
Industry observers attribute this strong performance to a series of positive developments within the Ethereum ecosystem. These include the successful launch of key testing phases ahead of upcoming network upgrades, which have bolstered investor confidence.
The Merge Transforms ETH into a Deflationary Asset
Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS), known as “The Merge,” has fundamentally changed the network’s economic model. Before the Merge, Ethereum had a dual-layer issuance system: the execution layer (mainnet) rewarded miners with up to 13,000 ETH per day, while the consensus layer (beacon chain) issued around 1,700 ETH daily to stakers.
Annualized, this meant inflation of approximately 4.09% from the execution layer and 0.52% from the consensus layer. Post-Merge, however, mining rewards have been eliminated entirely. Now, ETH issuance consists solely of staking rewards, offset by tokens burned through transaction fees under the EIP-1559 mechanism.
This shift has placed Ethereum on a deflationary path. Data from analytics platforms shows that since The Merge, the ETH supply has decreased by nearly 5,700 tokens. In contrast, had the network remained on PoW, the supply would have increased by over 693,000 ETH. The current annualized inflation rate stands at approximately -0.03%, meaning more ETH is being destroyed than issued.
On November 9th, the network recorded a milestone: 5,242 ETH were burned in a single day, marking the highest burn rate since The Merge and pushing Ethereum into deflation for the first time.
Analysts: Ethereum Sets the “Benchmark” for Staking Yields
Bloomberg Intelligence analysts recently highlighted Ethereum’s growing influence in the staking landscape. In a October market outlook, they compared real-world staking yields across major Proof-of-Stake blockchains and found that only Polkadot and Cosmos offered higher returns than Ethereum.
Ethereum’s adjusted annual staking yield sits at around 5%, establishing what analysts call a “benchmark” for the sector. The report suggests that assets offering yields significantly below this rate may be mispriced and could face capital outflows. Ethereum’ strong fee revenue and disciplined monetary policy make it a natural reference point for crypto investors evaluating opportunity cost.
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Ethereum’s combination of sound tokenomics, high utility, and increasing adoption continues to strengthen its investment thesis. While short-term price movements can be volatile, the long-term fundamentals appear robust.
Frequently Asked Questions
What caused Ethereum’s price to rise recently?
Ethereum’s price increase can be attributed to its successful network upgrade to Proof-of-Stake, which reduced new ETH issuance and increased staking yields. Positive market sentiment following key testnet launches also contributed.
How does EIP-1559 make Ethereum deflationary?
EIP-1559 introduces a fee-burning mechanism for each transaction. When network activity is high, more ETH is burned than is issued through staking rewards, leading to a net decrease in supply.
Is Ethereum a good long-term investment?
Many analysts view Ethereum favorably due to its established ecosystem, continuous upgrades, and deflationary mechanism. However, like all cryptocurrencies, it carries risk and investors should conduct their own research.
What is the current Ethereum staking yield?
The current yield for staking ETH is approximately 5% annually, though this can vary slightly based on network activity and total stake.
How does Ethereum’s performance compare to Bitcoin?
In the short term, Ethereum has often shown higher volatility and potential for greater returns than Bitcoin, though it also carries higher risk. Over recent months, ETH has outperformed BTC in terms of percentage gains.
Can Ethereum remain deflationary during bear markets?
During periods of low network usage, fee burn may decrease, potentially making Ethereum slightly inflationary again. However, the overall issuance rate remains much lower than it was under Proof-of-Work.