The upgrade of London is completed, and ETH is burning wildly

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(Picture) If it stands on the upper track of the $2,900 box, ETH will accelerate its rise

Before the upgrade in London, several major trading platforms issued airdrop plan announcements one after another considering that there might be miners forking to produce candies. Therefore, some people believe that the recent continuous rise of ETH is because the holders may receive airdrops. Once the upgrade is completed, regardless of whether there is candy or not, ETH will plummet due to the realization of the benefits.

However, unexpectedly, the London upgrade was successfully completed without a miner fork or a price crash. Stronger than BTC, it also experienced a short-term sharp retracement after the benefits of the halving of production were realized. ETH did not plummet after the favorable landing, how did it do it?

| Amazing data destroyed on the first day

The reason behind the strong price is actually very simple-this is the most important upgrade in the history of ETH. To be more intuitive, directly go to the data to see the amount of ETH destroyed after this upgrade. In less than half a day (the picture above shows the data at 8 am on August 6), more than 3,000 ETHs have been permanently destroyed, and the main sources of contribution include addresses starting with 0xE4C (it has been verified that it is a protocol called COVIDPunks) , Opensea, UniswapV2 and V3, Tether, AxieInfinity, Matamask and other applications, basically covering DEX, DeFi, NFT

, GameFi and other sectors.

In fact, any activity on the ETH chain will cause a steady stream of ETH to be destroyed, and this number will continue to rise with the prosperity of various protocols and applications on the ETH chain.

At present, the annual inflation rate of ETH is about 4%, that is to say, the number of additional issuances per year is more than 4 million. According to the current speed, 6,000 pieces will be destroyed every day, and 2.19 million pieces will be destroyed every year. Isn’t this equivalent to halving the output? Because the burning of ETH is in full swing, some netizens joked that BTC is also known as big cake; then ETH should be called sesame cake now .

However, the editor believes that the destruction data of ETH on the first day is blessed by the influence of the event heat, and it needs data support in a longer time range to be closer to the real situation. After the heat comes down, it is conservatively estimated that the annual inflation rate of ETH will drop to at least about 3%. Even so, it can be regarded as a very big long-term benefit.

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(Picture) ETH's Google search volume rebounded strongly

The strength of ETH is also reflected in Google search volume. It is foreseeable that the accumulated destruction of ETH base fees will become an indicator of long-term concern, and news about ETH destruction will appear in media reports from time to time. With the increase of exposure and attention, retail investors and institutions willing to understand and join the ETH ecosystem will continue to increase.

| Total supply may decrease

In the past, the biggest criticism of ETH was that the total supply was unlimited, and the currency price would be continuously diluted. Now, that situation may be eased or even reversed. As shown in the figure above, the total supply of ETH can be divided into 6 stages, namely A (Creation) B (Byzantium) C (Constantine) D (Beacon chain pledge) E (London upgrade and destruction base fee) F (PoW to PoS). From the perspective of changes in total supply, each block produces 5 ETH in phase A, 3 ETH per block in phase B, and 2 ETH per block in phase C, and the inflation rate gradually decreases.

After the London upgrade, the inflation rate is further reduced due to the destruction of the base fee. Assuming that the pledged ETH is 10 million, calculated according to the basic gas fee of 14Gwei, the ETH destroyed every day just offsets the daily increase of 1,400 ETH after switching to PoS. In this case, by the end of January 2022, the total supply of ETH will be constant at around 119.4 million.

Another assumption, if the ETH involved in the pledge is 10 million pieces, calculated according to the current basic gas fee of 35Gwei, then it is estimated that by the end of January 2022, the total supply of ETH will drop to about 119 million pieces, and the total supply will decrease with the Time variation is constantly decreasing.

| "Teams at work"

In fact, as early as June 27, 2017, V God explained the problem of ETH inflation on Twitter, "As long as the Casper upgrade is completed (converted to PoS), the annual inflation rate of ETH may drop to 0.5-2% (Note: currently about 4%). After the implementation of partial transfer fee destruction (London upgrade), if the fee rises, the annual inflation rate of ETH may drop to 0, or even lower (deflation).”

When God V said this at the time, many people didn't take it seriously, and even thought it was just drawing cakes. However, from the current point of view, ETH is basically upgrading in an orderly manner along the roadmap. Whenever the price of an altcoin drops, people in the circle often use "hold on, the team is working" to joke. This sentence is actually more suitable for ETH, because the ETH team is really doing things.

| BTC Vs ETH

According to foreign ETH supporters, if BTC with a fixed supply is a sound money (sound money), then after EIP1559, if the amount of destruction > additional issuance, the total amount of ETH will continue to decrease and become an ultra-sound money (ultrasound money) ). Coupled with the development of the ecology on the ETH chain and the PoS mechanism, ETH will simultaneously have four attributes: value storage + deflationary assets + interest-generating assets + means of production, which is very attractive to funds inside and outside the circle.

In addition, according to a report by GenesisGlobalTrading, an over-the-counter digital asset trading company, the role of BTC as a gateway asset for the encryption industry is changing. In the second quarter of 2021, institutional investors are paying more and more attention to ETH and DeFi projects.

After reading the above logical deduction, you may ask, "The narrative of ETH has become so powerful, will the status of BTC be weakened, or even be taken away by ETH as the leading cryptocurrency?"

The author believes that the market value of ETH may exceed BTC in the future, but in essence, BTC and ETH are not assets of the same track, they represent different directions.

The direction represented by BTC is a stable value store, which hedges against the inflation of fiat currency and the vulnerability of assets in the traditional world (easy to be frozen or censored). Since Satoshi Nakamoto has disappeared for a long time, as time goes by, the probability of his reappearance is extremely low. BTC has become a decentralized asset that is not subject to any single entity, and is not easily subject to centralized supervision or founder behavior. impact of decisions. Therefore, BTC's position in the value storage track is almost unshakable.

ETH represents the direction of blockchain technology application, and it is also a decentralized asset, which has more gameplay and possibilities than BTC. However, holding ETH is more like holding shares in a company that may become a giant in the future, and will inevitably be influenced by its founder and technical team. If it encounters a regulatory attack or other unexpected events, the stability of ETH is likely to be weaker than that of BTC. In addition, although ETH has a strong user group and ecology as a moat, in the blockchain world with rapid technological development, the challenges of other public chains in the future cannot be ignored.

Therefore, no matter how strong ETH's narrative becomes, even if it surpasses BTC in market capitalization, it still cannot replace BTC's special status. As assets of different tracks, it is safe to configure both, BTC is more stable, ETH has higher risks and may also have higher returns.

| BTC trend analysis

Finally, let’s take a look at the price chart of BTC again. Historically, the weekly EMA21 is generally considered to be the dividing line between technical bulls and bears. At present, BTC is trying to change EMA21 from a resistance level to a support level, and the weekly line has a strengthening trend. If it can break through the resistance level of the lower pressure line (near 42000), then it can look at 47000-50000 US dollars in the short term.

In terms of cyclical indicators, the proportion of BTC long-term holders (LTH) has also rebounded sharply, reaching 66%. The proportion of short-term holders (STH) holdings has dropped sharply, and has now dropped to 20%. According to the past situation, in the bull market cycle, the proportion of LTH holdings is usually between 63.6% and 71.5%. Judging from the current situation, more and more BTCs are being absorbed by long-term holders. As time goes by , the probability of a price increase is much greater than a decrease.