Ethereum Supply Shock

Definition ∞ An Ethereum supply shock denotes a sudden and significant reduction in the available supply of Ethereum (ETH) on exchanges or in liquid circulation. This event typically results from large amounts of ETH being locked in staking contracts, decentralized finance protocols, or moved to cold storage. A supply shock can lead to increased price pressure due to heightened demand against constrained availability. It represents a fundamental shift in market dynamics.
Context ∞ The potential for an Ethereum supply shock is a recurring theme in market analysis, particularly following network upgrades like the Merge which introduced staking. Discussions often center on the long-term implications for ETH’s valuation and its role as a deflationary asset. Monitoring on-chain metrics related to supply movements is key to anticipating such market events.