Ethereum reclaims $3.35K as ETH supply squeeze continues

• London hard fork and supply squeeze facilitated the price increase.
• Ethereum deposit contracts and the number of 32-plus coin holders confirm the nearing uptrend.
• The rally stalled of a few days at the $3,350 resistance line.

YEREVAN (CoinChapter.com) – Ethereum(ETH) reclaimed its $3,350 level in the European session Monday, while the London hard fork, implemented at the beginning of August, continues to control the fees and limit the token supply. Moreover, the number of deposit contracts and 32-plus coin holders is on the rise.

Hard fork and supply squeeze

The Ethereum 2.0 upgrade dubbed “London hard fork” entailed a number of significant reforms on the blockchain, including the improvement protocol EIP-1559. It will achieve the shift from proof-of-work mechanism to proof-of-stake consensus. The latter involves validators, who verify transactions on the platform, instead of miners.

Among other aspects, the EIP-1559 involves a token-burning mechanism. The decision to burn a certain amount of ETH from the transaction fees proved to be one of the most controversial in the upgrade.

In detail, crypto-burning means sending cryptocurrency to a wallet that no one can access. Thus, burning removes tokens from the active supply, that would otherwise go to miners. The process creates a so-called supply squeeze, which skews the supply-demand equilibrium.

The demand is still high due to the fundamental advantages of Ethereum, now that the platform attempted to solve the scalability issue, along with notoriously high gas fees. However, the supply squeeze created a shortage, which could fuel the bullish price action.

According to etherchain.com, a total of 78015.6 ETH have already been burnt so far, with a rate of 3.4 ETH a minute ($11,277 at the current price).

Also read: First ever ETH burned as Ethereum’s milestone hard fork goes live

Ethereum deposit contracts and holders

According to Glassnode analytical platform, the number of ETH deposit contracts has grown to reach the total value of $23.2 billion. The platform registered the last all-time high value of $23.1 billion only two days ago, on August 21.

In retrospect, the deposit contracts are where users need to send their ETH tokens if they want to stake them on the new upgraded network. The growing number indicates the willingness of users to participate in the staking and earn rewards, sustaining the network in the process.

📈 #Ethereum $ETH Total Value in the ETH 2.0 Deposit Contract just reached an ATH of $23,224,232,889.09

Previous ATH of $23,136,927,063.71 was observed on 21 August 2021

View metric:https://t.co/1ezmu1GKcj pic.twitter.com/AhCFklhJEF

— glassnode alerts (@glassnodealerts) August 23, 2021

Glassnode also registered a growing number of wallets that hold over 32 ETH coins ($107,760 in the current exchange rate). In detail, 32 coins is the minimal amount necessary to stake, in order to become a validator on the network. The number of those wallets reached a three-month high of 107,997.

📈 #Ethereum $ETH Number of Addresses Holding 32+ Coins just reached a 3-month high of 107,997

Previous 3-month high of 107,993 was observed on 21 August 2021

View metric:https://t.co/rkRWanL3OS pic.twitter.com/vs9re0WQjP

— glassnode alerts (@glassnodealerts) August 23, 2021

Both stats presented above fueled the Ethereum rally in the conditions of the supply squeeze and brought the price up to $3,334 in the European session Monday.

Also read: Ethereum exchange deposits drop to 2-year low as ETH nears its previous ATH

ETH daily chart

The ETH rally that initiated with the recovery wave led by Bitcoin on July 21, halted on August 8. Since then the alpha altcoin consolidated at approximately $3,180. However, on several occasions throughout the past week, the digital asset managed to climb up to the $3,350 resistance line.

If ETH manages a confident breakout, it could retest the said line as support. The evidence listed above suggests that the uptrend is in the making.

In addition to the growing number of holders, the funds in the deposit contracts, the technical indicators suggest a continuation of the uptrend, and possible new highs for Ethereum in the near future.

Also read: Ethereum to power Microsoft’s anti-piracy plans with Argus