Cryptocurrency traders usually consider price the leading index for past analysis and future projections. However, tokenomics and supply inflation can drastically impact the price of any asset, and crypto investors can use the market cap as a demand index to evaluate these effects.
In this context, Finbold looked at Ethereum (ETH) tokenomics from a capitalization perspective. Public market data from cryptocurrency indexes can demonstrate the effects of increased supply inflation on Ethereum. We calculated the exact price ETH would trade if it ever hits the all-time high market cap.
An inflationary supply requires more demand to maintain its value over time. These two factors determine whether a cryptocurrency’s price rises or falls. Ethereum, with its unique tokenomics design, is a prime example of this dynamic.
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Ethereum had an all-time high market cap of $575.899 billion on November 10, 2021, according to TradingView’s CRYPTOCAP index. Meanwhile, Ether traded for as high as $4,878 on the same day, as registered by Finbold. An inverse calculation suggests a circulating supply of around 118.06 million ETH at that time.
Ethereum supply inflation and its economic effects
Let’s explore Ether’s supply inflation and its economic implications. Ethereum has a circulating supply of 118.619 million ETH as of the time of this writing. This results in a supply inflation of 559,000 ETH (0.5%) in two years.
Essentially, the burning mechanism implemented in 2021 assisted in controlling the effective inflation caused by new Ethers issuance to reward staking validators.
The price projection also shows the effects of this tokenomics. In case the leading Web3 blockchain reaches its highest speculative demand of $575.899 billion market cap, ETH would trade at a proportionally lower price than the corresponding all-time high.
Considering the circulating supply on November 28, Ethereum would be priced at $4,855 per token at its highest capitalization. Interestingly, a loss of $23 (47%) from the previous price of $4,878 in 2021.
However, this still indicates a potential 138% increase from the current price of $2,035.
It is important to understand that the forecast requires the same demand as 2021 for Ethereum. In this context, there are no guarantees that this demand will ever be seen again. On the other hand, it is also possible that a higher demand surges in the following years.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
