The Ethereum supply has been deflationary over the past week, dropping by more than 5,500 tokens. However, the token’s price hasn’t reflected the developments and has instead plunged by around 7% during this period.

Ethereum Goes Deflationary For Four Days

Amid a surge in on-chain activity over the past seven days, the number of ETH tokens being burned exceeded the number of new tokens being issued. Therefore, the second-largest cryptocurrency has gone deflationary, marking the network’s first deflationary run since its landmark move to Proof-of-Stake (PoS) in September.

According to data from Ultrasound.money, the cost of gas fees and ETH burning rate has been more than the ETH token issuance since Saturday. Therefore, the total amount of ETH in circulation has dropped by more than 5,515 ETH and counting, with the rate of burning continuing to outpace the rate of ETH creation.

More precisely, Ethereum’s token supply has decreased by 0.18% over the past week. The network has burned 15,720 ETH tokens during this period, with 4,380 ETH of that tally coming from users rushing to interact and mint XEN tokens, a recently launched project launched by the “Fair Crypto Foundation.”

XEN Causes Gas Fees to Surge

Reportedly, users can mint XEN tokens for free by paying the gas fee. They can then stake the token to earn an APY of 20%. The project claims that 582K wallets have minted the token but only 1K wallets have staked their tokens.

Prior to the Merge, Ethereum distributed around 13,000 ETH per day to miners, who were responsible for keeping the network safe by running their mining regs, and 1,600 ETH per day to validators (who ran the consensus layer, or the Beacon Chain).

However, an immediate impact of the Merge was the massive supply shock. Since Ethereum miners were not needed to secure the network following the upgrade, the network also didn’t have to print thousands of new tokens per day to incentivize them. Therefore, Ethereum issuance has dropped by 98% since the Merge.

Ethereum Price Fails to Reflect Drop in Supply

Ethereum price has been in a downtrend ever since the network successfully finished its much-anticipated upgrade. The token is down by more than 22% since the Merge, and even the recent deflationary run couldn’t reverse this trend.

According to data by CoinGecko, Ethereum is down by 8.3% over the past week and by 27.5% over the past month. The cryptocurrency is currently trading around $1,240, down by more than 4% over the past day.

Notably, the broader crypto market is also reflecting the same trend. The flagship cryptocurrency has extended losses to below $19,000, dropping by another 2% over the past day. Bitcoin and Ethereum, along with almost all crypto assets, are down by more than 70% compared to their all-time highs.

However, as reported, the increasing open interest suggests Bitcoin and Ethereum are ready for a breakout. The open interest in Bitcoin perpetual has increased to around 500k over the past week, reaching all-time highs.

This article originally appeared on The Tokenist

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