Now that Ethereum has completed its transition to proof of stake, Ethereum is no longer supported by its miners, but there are still those who mined Ethereum previously who hold a large amount of ETH, and some analysts have warned that this could be problematic for the ETH price going forward.
ETH balance in miner wallets has peaked
The total amount of ETH that is held by miners (and derived from mining activities) has now peaked, since miners are no longer being rewarded with ETH.
This means that any concerns over rising miner outflows are likely overblown – those who were formerly Ethereum miners can choose to either hold onto their ETH or sell it.
If they choose to hold, then there ought to be no negative impact on the price, and there is a limit to how much they can eventually sell.
The total amount of ETH held by miners appears to have peaked at just over 260,000 ETH, but the value of these holdings has been declining in dollar terms for quite some time.
Near the peak of the bull market in November of 2021, Ethereum miners held over $700m in ETH, but this number has gradually dwindled (even as they stock up on ETH heading into the merge) and now stands at just over $300m.
Inflation will now be awarded to Ethereum stakers, not Ethereum miners
Now that the merge has been successfully completed, the inflation that Ethereum requires henceforth to secure the network will be awarded to those who have deposited their ETH in the staking contract.
This means that concerns over miners selling a lot of their Ethereum may be overblown, since the majority of selling pressure henceforth won’t be from miners – their share of the Ethereum network ought to gradually diminish over time.
Proof of stake rewards those who already hold a lot of ETH, rather than taking the more egalitarian approach encompassed by proof of work, in which those who exert energy to support the network are rewarded.
Fortunately for miners, this silver lining means that they ought to be able to continue to expand their ETH holdings, if they so choose, without needing to worry about the hardware costs – it is quite likely that many will remain loyal to Ethereum, even now that Ethereum has decided to migrate to proof of stake.
Shanghai opens the door for a lot of ETH to be sold
The Shanghai hard fork, which is forecast to take place in 2023, begins the process of unlocking ETH from the staking contract, and means that a queue will be initiated for those who wish to make withdrawals.
There is currently 14m ETH in the deposit contract, and fortunately for holders of ETH this can’t all be sold at once – when the hard fork commences, the withdrawal queue will be initiated.
Those who are concerned about the ETH price dumping are right to be concerned about the 14m ETH that is going to be unlocked during the year after the Shanghai update – it is a far more concerning phenomenon for Ethereum holders than how much ETH the miners still have in their wallets.
Many people have had ETH staked in the deposit contract for quite some time now and seen the value of their holdings soar in value over the past few years.
Once the withdrawal queue that Shanghai kicks into action has ended, at some point in 2024, Ethereum will likely have far fewer headaches and obstacles in its way, and ought to be able to achieve true price discovery without the constant threat that there is a significant amount of ETH that could be dumped on the market.
It remains to be seen whether or not the steps that the Ethereum Foundation has decided to take will be able to successfully ensure that Ethereum maintains its longevity on a podium position in the world of crypto.
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