An on-chain study released by Kraken Intelligence highlights potent accumulation behavior among Ethereum miners even as they faced the prospects of generating lower revenue following a major network upgrade on Aug. v.

Ethereum miners accumulated an additional two meg Ether (ETH), worth $6.1 billion, after the so-called London hard fork'south activation. The latest bout of accumulation acquired miners' net Ether holdings to hitting an all-time high of 22.3 million ETH (worth nearly $seventy billion), which is virtually 19% of the total Ether supply.

"ETH accumulation was stagnant for most of the summer before picking up speed in July in spite of ETH toll trending lower," the Kraken report reads.

"However, ETH aggregating amidst miners really took off subsequently EIP-1559 as they likely saw the disinflationary furnishings of the upgrade to drive upward price."
Ethereum miner supply. Source: Kraken Intelligence, Money Metrics

Miners snub EIP-1559 FUD

EIP-1559, which went alive alongside the London hard fork on Aug. 5, divided transaction fees (chargeable via Ethereum's native token, ETH) into two parts: the base fee and priority fee.

The network started charging base of operations fees to add transactions to Ethereum blocks. Meanwhile, it introduced priority fees — or voluntary tips — that Ethereum users pay to miners to speed up transactions.

But EIP-1559 inverse the manner Ethereum'south token economy works past introducing a fee-burning machinery. In doing and so, the comeback proposal initiated the burning of the base fee, thereby making ETH a deflationary asset by permanently removing a part of its supply from circulation.

Burning a portion of total fee collection also means a drop in revenue for Ethereum miners. As a result, EIP-1559'due south launch sparked warnings about lower mining profitability, with one study finding that miners' revenue dropped by 15% correct afterwards EIP-1559 went live.

Simply that didn't deter the miners from raising their Ethereum exposure, with Ethereum's hash rate reaching a record loftier of 736.67 terahashes per 2nd (Thursday/s) on Sept. 23.

Ethereum network hash rate performance in the last 12 months. Source: YCharts

That is despite a drop in Ethereum mining activity post-obit Mainland china'southward crypto crackdown in May, which later led the hash rate to a three-month low of 477.54 Thursday/southward. Kraken wrote:

"This tells us that not merely was the reaction to the China crackdown exaggerated, but miners too view the latest upgrade equally an overall boon for ETH that outweighed the con of its miner reward reduction."

NFT boom and staking sentiment behind the mining boom

Ethereum miners survived the EIP-1559 FUD primarily due to rising ETH prices and loftier network demand led by a smash in the nonfungible token (NFT) infinite.

Kraken noted that miner acquirement reached a about 4-month high of $lxx million on Sept. 7, rise 27% in a month afterwards the Aug. 5 upgrade every bit "NFT activeness in projects such as PALS, Loot, and Junkies likely pushed priority fees higher."

Ethereum miner revenue. Source: Kraken Intelligence, Money Metrics

But a recent slump in the NFT sector — led by potent corrections in the number of its daily active users (-23%), trading volume (-83%) and transaction count (-31%) — besides pushed miner revenue downwardly.

Nonetheless, the amount of ETH held past miners surged to its highest level to date, prompting Kraken to deduce that they are accumulating and mining Ether tokens to become validators on the upcoming Ethereum proof-of-stake chain, dubbed Ethereum 2.0.

Users need to stake 32 ETH into Ethereum 2.0 smart contracts to go validators on its network. In return, they may earn up to a 5% annual percentage rate. As of Sept. 29, Eth two.0 has attracted 7.813 meg ETH, worth $two.85 billion, from 48,780 unique depositors, as per information provided by CryptoQuant.

Related: Ethereum residuum on crypto exchanges hits new lows as ETH cost retakes $3K

Meanwhile, every bit more than Ether tokens leave of active supply due to staking and EIP-1559 activation, the prospect of holding ETH might announced profitable for miners due to classic supply and demand models.

Ether was trading at $3,006 at the fourth dimension of writing, up more than than 300% year-to-date.

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