Market Size

1、Cryptocurrency market share analysis

According to data from TradingView in July 2022, as the largest digital currency, Bitcoin currently accounts for about 42% of the total market value of cryptocurrencies, down from about 70% at the beginning of the year. The market share of the second-ranked ETH has risen from around 11% in early 2021 to 19%, and the total share of other cryptocurrencies is around 13%.

While Bitcoin remains the largest cryptocurrency by market capitalization, other cryptocurrencies, represented by ETH, are catching up quickly. Take ETH for example, the continuous growth of the huge Defi ecosystem, the EHT "London" hard fork, the reform of the ETH fee structure, and ETH 2.0 have accelerated the rise of ETH and the occupation of market share.

According to the official data from Glassnode, the stake amount of ETH2.0 deposit contracts in early July has exceeded 13 million ETHs, which is about 10.9% of the total circulating supply. With the arrival of the ETH2.0 merge, the stake amount of ETH will continue to increase.

2、ETH Circulation declines by 90%--inflation rate drops

Bitcoin halves its issuance rate every 4 years, while Ethereum will reduce its issuance rate by about 90% when it merges, because the miners no longer need to be rewarded for mining. The community refers to this situation as "Triple Halvening" because it is equivalent to the three times ‘halving’ of bitcoin in one sitting. That reduction in Ethernet is instantly, while the Bitcoin network will need an extra 12 years to reach the same level.

Under the PoW model, Ethereum generates about 13,500 ETH per day (the annual issuance is about 4.3% of the total ETH supply). However, the PoS issuance model is based on the amount of live ETH on the network. Current forecasts show that the issuance rate will drop to between 0.3% and 0.4% when the merge starts.

The staking mechanism of PoS will also bring huge dividends to the staking circuit.

When "The Triple Halvening" is combined with EIP-1559's BASEFEE burning mechanism, it is expected that the issuance of Ethereum will actually become deflationary during periods of high user activity. Deflation means that the currency has stronger and stronger purchasing power over time, and the market circulation of ETH will be less than is required for actual circulation.

After the merge completed, more and more people will choose to stake ETH

Currently, about 10.9% of the ETH supply is staked. All staked ETH will cease to circulate until the merge is completed. The ETH staking yield could be between 8.7% - 10.3%, depending on the amount of ETH staked, network fees, and MEV (Miner Extractable Value) after merge.

As of June, about 13.46 million ETH has been staked, with about 400,000 validators and an APR of about 4.2%. Stakers will also receive gas fees that currently belong to miners, which will increase APR by 2 times even more.

An APR of 4.2% can be considered as a near risk-free return on Ethereum. When it goes up, it will attract more ETH to be staked.

After the merge, stakers will have the option to withdraw, and staking rewards may also be doubled. If the ETH stake ratio reaches the current average of the top PoS public chains, the overall ETH stake may also increase by a factor of six.