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ETH Burn Mechanism Faces Challenge Amid Rate Hike Predictions

The crypto market has reacted negatively to speculations over the United States Federal Reserve’s (Fed) proposed interest rate hikes. As a result, the total market capitalization for the digital asset sector has plummeted by $30 billion, reflecting current uncertainties in the industry.

Problematic Burn Rate For ETH

By the end of this month, a significant event that will shift the dynamics of the crypto market will occur. $3 billion in quarterly Bitcoin options and $1.8 billion in contracts linked to Ethereum (ETH) will expire by September 30, 2023.

Furthermore, Ethereum, the second-largest crypto asset, hasn’t seen a significant shift in on-chain activity so far this month. In contrast to its usual price action, this month has been relatively quiet for the king of altcoins.

According to Ultra Sound Money data, more than 13,000 ETH, equivalent to $21 million, have been injected into Ethereum’s circulating supply since the start of the month. However, this unexpected influx has sparked a flurry of debates and speculations within the crypto community as analysts try to pinpoint its underlying implications for Ethereum’s market dynamics and the broader crypto market.


Based on the insights of market observers, this trend suggests that Ethereum’s burn mechanism, designed to reduce the overall supply of ETH, has had difficulty offsetting the influx of newly minted tokens. The surge in circulating supply is primarily due to rewards distributed to validators, a phenomenon intensified during this period of low network activity.

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As a result, the unexpected influx of ETH adds an intriguing dimension to the ongoing discussions about this cryptocurrency’s economic model and the network’s ability to maintain a balance between supply and demand. Nevertheless, analysts and stakeholders are keenly following these developments, especially their implications for Ethereum’s long-term sustainability and stability.

$30 Billion Out Of Crypto Market

According to the Federal Reserve’s latest projections, there will be a median interest rate of 5.6% toward the end of the year. This represents a significant increase over the current range of 5.25% to 5.5%.

The proposed rate hike was reportedly supported by 12 Fed officials, with 9 opposing the move. Consequently, analysts noted that this proposed rate hike sets the stage for a pivotal shift in the monetary policy landscape.

More importantly, Market participants are closely monitoring these developments and preparing to adjust their strategies in response to the changing interest rate move.

According to data from CoinMarketCap, the crypto market is currently in a contraction, with its total market cap down by $30 billion. In addition, the market’s aggregate capitalization stands at $1.05 trillion, indicating a 0.3% retracement from the previous value in the last 24 hours.

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Meanwhile, Bitcoin (BTC) and Ether (ETH) saw a decline of 1.8% and 1.1% in price over the last day, according to current Coingecko data, as the top crypto assets continued their brief struggle. Analysts added that the price fluctuations of the two largest cryptocurrencies in terms of market cap underscore the sector’s volatility.

Additionally, the retracement in the crypto market may have been influenced by the Fed’s announcement of an interest rate rise, among other variables. Even though Ethereum’s on-chain activities dropped in September, observers believe other market factors may have triggered such a trend decline.

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Bradley Nelson

Bradley Nelson is a US based cryptocurrency news writer for Tokenhell, he helps readers stay up to date with the latest trends and news from the blockchain and crypto world. Bradley has been a crypto enthusiast since 2018.

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