Ethereum's Deflationary Future: Analyst Predicts Return to Scarce Supply

A prominent crypto analyst, known as Machi Big Brother, recently asserted that Ethereum (ETH) is poised to become deflationary once more. The statement, shared on social media, reignites discussions within the cryptocurrency community regarding the long-term supply dynamics of the second-largest digital asset. Ethereum's monetary policy has been a key focus for investors, particularly since significant network upgrades.

Ethereum's journey towards potential deflation began with the implementation of Ethereum Improvement Proposal (EIP)-1559 in August 2021, which introduced a mechanism to burn a portion of transaction fees. This burn mechanism, combined with the Merge in September 2022 that transitioned Ethereum to Proof-of-Stake and drastically reduced new ETH issuance, created periods where the network's supply decreased. The concept of "ultrasound money" emerged to describe this potential for scarcity.

However, recent data indicates that Ethereum's supply has experienced periods of inflation, particularly following the Dencun upgrade in March 2024. This upgrade, designed to optimize Layer 2 solutions and reduce transaction fees, consequently led to a decrease in the ETH burn rate. As of late 2025, Ethereum's supply has generally been growing, with some reports indicating an annual inflation rate around 0.16% to 0.82%, depending on the period and methodology.

Despite the recent inflationary trend, the underlying mechanisms for deflation remain active. If network activity increases significantly, leading to a higher volume of transactions and thus more ETH burned through EIP-1559, the burn rate could again surpass the new ETH issued to validators. This scenario would result in a net reduction of Ethereum's total supply. The balance between issuance and burn is highly dependent on network usage.

The prediction by Machi Big Brother suggests an expectation of renewed high network demand or other factors that could push the burn rate above issuance. While the Dencun upgrade reduced the immediate deflationary pressure, the potential for Ethereum to become deflationary again underscores the dynamic nature of its monetary policy, driven by both protocol design and ecosystem activity.