It’s been over a month since Ethereum’s consolidation, and one of the big changes investors have been waiting for has taken place: ether has become a “deflationary” asset. In cryptocurrency terms, that means that the supply of ether is currently decreasing rather than increasing. But while many investors hope that will push crypto prices higher (assuming there is no change in demand), that has yet to happen in a significant way. Despite the underlying supply and demand dynamics on the network, the macro landscape still has a strong impact on crypto prices. “In theory, if we see a deflationary environment there should be upward pressure on prices, but there are other factors influencing ether prices,” said Owen Lau, an analyst at Oppenheimer. “These tokens are still correlated with stock prices, with the macro environment. That actually has a bigger impact on current prices than supply and demand.” He added that everything is reversible. Also, there is a chance that things could be reversed and digital assets could become “inflationary” once again. The price of ether has been slightly lower since the post-consolidation sell-off in mid-September. As of Tuesday afternoon, it was down about 4% month-on-month and a similar level month-over-month. The supply of ether decreases as the amount of ether “burned” on the network, or destroyed and permanently removed from circulation, is greater than the amount produced. According to data provider Ultrasound Money, the recording function is a “scarcity engine driven by Ethereum’s transactional utility”. Last week, gas or transaction fees were high, possibly due to higher traffic on the network. Ethereum uses those gas fees to burn tokens, so with higher fees the network has more coins to burn. “We don’t know when the Fed will pivot, we don’t know the next CPI figure, but there are some network-specific things that could change prices,” Lau said. “If there are more use cases built on top of Ethereum, that could also support the ETH price,” he added. “If there’s another big NFT launch or a big drop and they’re using ETH as a medium of exchange, that could also increase demand. We just don’t have all those catalysts. hey, it looks like we haven’t heard of them other than the consolidation itself.” Ether shares are rising. At some point if the rate of stocks goes up high enough, this deflationary scenario could actually go back to inflation. However, high gas fees can always come down, Lau said, and that means less ether for the network to burn. “At some point, if you burn less ETH but at the same time people bet more, then you could see the network pass another equilibrium where the net supply will increase,” he said. “It will become an inflationary asset… This situation may not last forever.”