Ethereum miners seem extremely reluctant to sell their precious ETH, based on new data from on-chain analytics platform Santiment.
The amount held by this category of crypto miners has reached a record level in US dollar terms – US$1.9 billion, with more than 532,750 ETH being stashed away.
And, according to the research, it’s the largest hoard of ETH held by miners since July 13, 2016 – at roughly 0.45 per cent of the total circulating supply, which is about 117.8 million ETH.
And the reason this is news? It indicates the miners are HODLing and therefore believe the price of ETH is likely to increase.
Crypto miners, whether its Bitcoin, Ethereum, or any other proof-of-work cryptocurrency, usually adopt a business model of selling the asset at fairly regular intervals – in order to cover their expenses, such as high electricity bills and hardware/rig costs.
ETH miners – a dying breed
Ethereum miners can still turn a profit from their enterprise while the blockchain retains a proof-of-work consensus mechanism. However, they are on borrowed time, as the no.2 blockchain is set to become a non-mineable, proof-of-stake token, per its Eth2 upgrade, which will complete towards the very end of 2021 at the earliest, but more likely early 2022.
As Bloomberg analyst Mike McGlone pointed out in his latest research report, the Ethereum “supply squeeze” is a strong narrative at the moment, driven by the protocol’s EIP-1559 upgrade introduced in August.
It’s an upgrade that enabled the automatic burning of some of the “gas” fees (in ETH) used to transact on the network, thus reducing supply and ostensibly turning Ethereum into a deflationary asset.
Since the EIP-1559 upgrade went live on August 5, 475,459 ETH – worth about US$1.73 billion – has gone up in figurative flames, according to the Burned Ether Twitter account.
Additionally, a large amount of ETH is also being staked on the Eth2 Beacon Chain contract, which only adds further to the supply squeeze. Almost 7.9 million ETH is currently locked up for staking, according to the Eth2 explorer, which is about 6.7 per cent of the Ethereum circulating supply.
A hardfork upgrade for the Beacon Chain, known as Altair, is set to occur on October 27. According to an Ethereum Foundation blog, this upgrade will be a “low stakes warm-up” to prepare Beacon Chain developers for the coming merge to its proof-of-stake era.