Ethereum’s Supply Hits 120.5M—Is ETH’s Deflationary Model at Risk?
Dencun Update and Leadership Tensions Spark Concerns Over Ethereum’s Stability
Ethereum (ETH) has reached a new milestone—its circulating supply has surged to 120.5 million ETH, the highest level since January 2023. This increase raises concerns over Ethereum’s long-term supply control, especially as its “ultrasound money” narrative faces challenges.
The supply jump mirrors levels last seen during The Merge upgrade on September 15, 2022. Astaria CEO Justin Bram revealed the data, igniting discussions about Ethereum’s evolving economic model and its potential impact on price stability.
How the Dencun Update is Driving Ethereum’s Supply Growth
Ethereum’s supply increase is directly linked to the Dencun update, which introduced a new transaction fee structure.
According to Presto Research expert Jaehyun Ha, the update allows blob transactions to use “blob gas” units, which significantly reduces the amount of ETH burned per transaction.
Key consequences of this update:
✅ Higher transaction capacity as Ethereum scales to support more users.
✅ Reduced ETH burning, leading to a rise in circulating supply.
✅ Potential inflationary concerns as supply growth outpaces deflationary mechanisms.
This change undermines Ethereum’s post-Merge deflationary model, where transaction fees were expected to gradually decrease ETH’s circulating supply over time.
Ethereum Faces Internal Leadership Conflicts
Ethereum’s supply issues aren’t the only concern—governance tensions are also heating up.
- Ethereum’s block gas limit has been raised to 31 million, the first increase since 2021. This aims to improve network scalability but could further affect supply dynamics.
- Internal disputes within the Ethereum Foundation are creating uncertainty. A proposal to appoint Danny Ryan as the Ethereum Foundation leader was rejected by Vitalik Buterin, leading to developer departures and concerns over the project’s direction.
Ethereum’s Price Struggles as Market Reacts
Despite a minor price increase, Ethereum remains down over 12% this week. The combination of rising supply, governance challenges, and shifting economic models has put ETH in a volatile position.
What’s Next for Ethereum?
Ethereum’s ability to maintain its “ultrasound money” status is now under scrutiny. As the supply grows and governance tensions rise, the market will be closely watching how Ethereum developers address these issues.
Will Ethereum remain the leading Layer-1 smart contract platform, or will these supply and governance issues erode investor confidence? The next few months could be critical for Ethereum’s long-term trajectory.
