Macro analyst and former Goldman Sachs executive Raoul Pal says that Ethereum (ETH) presents one of the best trading setups he has ever seen.
In a new interview, Pal says that ETH is shaping up to be the “greatest trade” as changes in Ethereum’s fundamentals work to greatly reduce the available supply of the second-leading cryptocurrency.
“I released Global Macro Investor last Monday or Monday, there was an article buried there, It was about six pages long and it was entitled, ‘The Greatest Trade,’ and it’s just Ethereum. I think [there’s] a better setup in Ethereum … than March 2020 was for Bitcoin…
Basically, there’s 13% of all the free float of Ethereum available. Everything else is being staked, locked and hoarded. They’ve just made the supply more difficult. The supply is lower. The Ethereum that is in free float is falling every day. And now we’ve just got the 1559 token out of the way. Most people are going to start staking the [ETH] they hold, and there’s no [ETH] available, and demand is going exponential. Exponential demand meets fixed supply equals exponential price rise. One of the best setups I’ve ever seen.”
Pal is referring to the recently launched EIP-1159 update, which introduces a fee-burning mechanism to the Ethereum network. With the upgrade, a certain percentage of fees is burned or removed from the system each time a transaction is processed.
Over 11,982 ETH, worth $37 million, has been burned at time of writing.
Just after EIP-1159 went live, prominent crypto trader Lark Davis told his 437,500 Twitter followers that he expects the daily supply of Ethereum to be cut in half.
“EIP 1559 went live today. More than 3,000 ETH has been burnt. Making us on course to burn around [6,000] to [7,000] ETH in the first 24 hours.
12,000 ETH will be mined today. This is about a 50% supply flow reduction, and we are still waiting on major wallets to upgrade.”
Davis is also looking at another approaching Ethereum update that he says can have a significant impact on ETH’s supply. The trader highlights the upcoming merger between the Ethereum mainnet and the beacon chain, which will mark the protocol’s shift from proof of work to proof of stake.
Lark says that the update can massively reduce the daily emission of ETH.
“Ethereum, as part of the merger from proof of work over into proof of stake, is going to undergo a 90% reduction in daily emission. Basically, we’re going to go from 12,800 Ethereum block rewards every day down to around 1,280 Ethereum a day, basically dropping the annual inflation rate from around 4.3% down to 0.43%. That’s a 90% reduction.”
The update, which is expected to happen this year, will enable ETH staking and signal the end of mining activities in the Ethereum network.