Ethereum (ETH) has entered a pivotal phase in its evolution, marked by surging network activity and shifting market dynamics. As the blockchain celebrates the final stage of its long-anticipated upgrade—the Merge—key on-chain metrics are flashing signals of renewed investor confidence and structural change. Notably, the total ETH balance across major exchanges has climbed to 21.96 million, the highest level since April 2022. This milestone reflects not just increased trading interest, but also deeper shifts in how users are interacting with the Ethereum ecosystem.
The surge coincides with the official activation of the Ethereum Merge on September 15, 2022—a historic transition from proof-of-work (PoW) to proof-of-stake (PoS). Vitalik Buterin, Ethereum’s co-founder, confirmed the successful completion via a now-iconic tweet, signaling a new era of energy efficiency and economic design for the world’s second-largest cryptocurrency.
Rising Whale Activity and Declining Dormancy
One of the most telling signs of growing conviction among ETH holders is the recent spike in whale addresses. According to on-chain analytics firm Glassnode, there are now 1,199 addresses holding at least 10,000 ETH, a clear indicator of large-scale accumulation. Even more significant, the number of addresses holding 1,000 or more ETH reached 6,535—the highest in nearly 16 months.
This trend suggests that long-term investors are taking a stronger position in Ethereum, likely anticipating future value appreciation post-Merge. Simultaneously, the dormant supply of Ethereum—coins that haven’t moved in over 155 days—hit a one-month low on September 15. Increased movement from previously inactive wallets often signals market awakening, as holders reassess their positions amid major network developments.
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The Merge: A Game-Changer for ETH Tokenomics
The transition to proof-of-stake isn’t just a technical upgrade—it’s a fundamental overhaul of Ethereum’s economic model. Simon Peters, Market Analyst at eToro, emphasizes that the Merge could be profoundly bullish for ETH’s price trajectory due to three key factors:
1. Drastic Reduction in New Supply
With the shift to PoS, the rate of new ETH issuance has plummeted by an estimated 90%. Under PoW, miners were rewarded with newly minted coins for validating blocks. Now, validators are compensated at a much lower rate, significantly reducing inflationary pressure on the asset.
2. Transaction Fee Burning
Since the introduction of EIP-1559 in 2021, every Ethereum transaction includes a base fee that is permanently removed—or “burned”—from circulation. With continued network usage, this deflationary mechanism steadily reduces the total supply of ETH over time. Post-Merge, this effect becomes even more potent as staking rewards decrease and fee burning persists.
3. Staking Takes Center Stage
Holders can now participate directly in network security through staking, earning passive income while locking up their ETH. Currently, over 13 million ETH are staked across the network—representing roughly 10% of the total supply. This locked-up capital effectively reduces liquid supply, increasing scarcity.
Together, these forces create a powerful deflationary flywheel: less new supply entering circulation, more ETH being burned through usage, and increasing amounts being staked for yield.
Exchange Balances: A Signal of Accumulation?
While exchange balances have risen to a five-month high—a potential sign of selling pressure—context matters. The increase may reflect users preparing for staking withdrawals (which were not enabled immediately post-Merge) or positioning for volatility during the transition. Historically, exchange inflows during major upgrades don’t always correlate with bearish outcomes.
In fact, many experts argue that once staking withdrawals are fully operational, we could see a net outflow as users move ETH back to private wallets or staking contracts. For now, elevated exchange balances should be viewed as part of a broader rebalancing rather than a red flag.
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Institutional Flows vs. Retail Momentum
Despite strong retail engagement and rising whale activity, institutional appetite for Ethereum-based investment products remains lukewarm. According to a recent report by CoinShares, Ethereum funds saw outflows totaling $61.6 million in the week following the Merge.
This divergence highlights a growing split between institutional caution and retail optimism. Institutions may be waiting for clearer regulatory guidance or full functionality of post-Merge features like staking withdrawals before re-entering the market.
However, this could also represent a contrarian opportunity. Historically, periods of institutional hesitation have preceded significant price rallies once confidence returns and capital follows.
Frequently Asked Questions (FAQ)
Q: What was the Ethereum Merge?
A: The Ethereum Merge refers to the network’s transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism, completed on September 15, 2022. It eliminated energy-intensive mining and introduced staking as the primary method for securing the network.
Q: Why did ETH exchange balances rise after the Merge?
A: Higher exchange balances can result from users transferring ETH ahead of anticipated volatility or preparing for staking-related transactions. It doesn’t necessarily indicate selling pressure—it may simply reflect short-term liquidity needs during a major upgrade.
Q: How does staking affect ETH’s price?
A: Staking removes ETH from circulating supply by locking it up for extended periods. With fewer coins available for trading and ongoing fee burning, staking contributes to scarcity, which can support price appreciation over time.
Q: Is Ethereum deflationary now?
A: While not consistently deflationary yet, Ethereum exhibits deflationary pressure due to EIP-1559 fee burning. When network activity is high and block rewards are low (as post-Merge), more ETH can be burned than issued—resulting in net deflation.
Q: What are whale addresses and why do they matter?
A: Whale addresses hold large amounts of cryptocurrency (e.g., 1,000+ or 10,000+ ETH). Increases in whale holdings often signal strong confidence among major investors and can precede upward price movements.
Looking Ahead: The Road Beyond the Merge
The Merge was never an endpoint—it was the beginning of Ethereum’s scalability and sustainability journey. Future upgrades like Sharding and Proto-Danksharding aim to drastically improve transaction throughput and reduce fees, making Ethereum more accessible for decentralized applications (dApps), DeFi platforms, and NFT ecosystems.
As development continues, metrics like exchange balances, whale accumulation, and staking participation will remain critical indicators of network health and market sentiment.
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Final Thoughts
Ethereum’s journey through the Merge has been nothing short of transformative. From record-breaking whale accumulation to revolutionary changes in tokenomics, the network is demonstrating resilience and long-term vision. While institutional flows remain cautious, retail enthusiasm and structural improvements suggest that Ethereum is building momentum for the next phase of growth.
For investors and developers alike, understanding these on-chain shifts is essential to navigating what comes next. As Ethereum evolves into a more efficient, secure, and economically sound platform, it continues to solidify its role as the backbone of the decentralized web.