Ethereum News Today: Ethereum's 5% supply reduction from 6M ETH lost and burns sparks $4K price potential?

Ethereum’s supply dynamics are shifting as over 6 million ether (ETH) is effectively removed from circulation through permanent losses and protocol burns, sparking speculation about its impact on price potential. The cryptocurrency, currently retesting the $3,800 resistance level, faces a critical juncture amid tightening liquidity and rising staking outflows. Validator exits have surged to 694,106 ETH, with a net staking outflow of 473,151 ETH, signaling waning participation in staking activities. Meanwhile, open interest on major exchanges like Binance has rebounded to $15 billion, highlighting renewed speculative interest [1].

The reduction in circulating supply stems from two key factors: permanent losses and protocol-driven burns. Smart contract audits reveal that 913,000 ETH—valued at $3.43 billion—is permanently inaccessible due to multi-sig freezes, contract bugs, and user errors. When combined with 5.3 million ETH burned via EIP-1559, nearly 6 million ETH (exceeding 5% of total issuance) is effectively locked out of circulation. This scarcity narrative aligns with broader market trends, where Ethereum’s dominance has dipped to 11.30%, a level last seen in early 2022 [1].

Technically, Ethereum’s 1D chart shows resilience at $3,800, a level that previously triggered an 8.5% drop to $3,531. However, the absence of panic selling and stable positioning suggest investors remain confident. The price action reflects a dominance-driven rotation rather than inherent weakness, as Bitcoin’s dominance ratio (BTC.D) rose 2.5% to 60.43%, compressing ETH’s relative strength. Analysts note that sustained Bitcoin dominance could force further capital reallocation, testing Ethereum’s ability to maintain its upward trajectory [1].

The shrinking supply and rising open interest create a fragile balance. With 12-day validator exit queues and $50 billion in open interest, liquidity for futures and margin trades is dwindling. This dynamic raises questions about whether Ethereum can break out of the $3,800 threshold—a move that could reframe the level as a launchpad for a $4,000 rally. However, analysts caution that any breakout would depend on sustained demand and a cooling in Bitcoin’s dominance, which has historically influenced altcoin performance [1].

Market participants are closely watching whether the supply squeeze will accelerate Ethereum’s price action or trigger renewed volatility. The interplay between permanent losses, protocol burns, and staking outflows underscores a structural shift in Ethereum’s economic model, potentially reshaping its value proposition in a competitive cryptocurrency landscape [1].

Source: [1] [title:6 mln ETH gone forever: Will shrinking supply fuel Ethereum’s $4K run?][url:https://ambcrypto.com/6-mln-eth-gone-forever-will-shrinking-supply-fuel-ethereums-4k-run/]