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EOS Price Rises 15% to $0.90 on Back of New Tokenomics Proposal Despite Persistent Inflation

Last Updated April 25, 2024 7:45 AM
Valdrin Tahiri
Last Updated April 25, 2024 7:45 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • The new EOS tokenomics proposal will introduce a maximum supply cap at 2.1 billion.
  • EOS has fallen more than 70 spots in the market capitalization rankings since 2020.
  • After a 15% price increase, can EOS sustain its rally and reach a daily close above $0.90?

During the previous bullish cycle, EOS, once a major project in the cryptocurrency space, fell by the wayside. In an effort to revive the project, its CEO proposed a new tokenomics plan.

EOS has been trending downward since 2021 and nearly fell to an all-time low. However, it has shown signs of life in 2024, breaking out from an important resistance trend line. If the proposal goes through, can EOS finally begin its new bullish cycle?

EOS CEO Makes New Tokenomics Proposal

The EOS supply is inflationary. In the past five years, it has increased from 940 million to 1.12 billion . This is a relatively low inflation rate of roughly 4% annually. However, EOS does not have a maximum supply.

As recently as 2020, EOS was ranked in the top 15  largest cryptocurrencies based on market cap. However, it currently ranks #84, at risk at falling out from the top 100.

EOS launched in 2018 with a 1 billion token supply and an annualized 5% inflation rate. After changes in 2020 and 2021, the network decided on a 4% annual inflation. There have been no changes in the EOS tokenomics since then.

 

On April 24, EOS CEO Brendan Blumer proposed a new tokenomics plan, attempting to bring EOS back in the spotlight and fix its inflation issue.Blumer stated that he will meet with the Block Producers to discuss the new proposal.

EOS uses a Delegated Proof-of-stake (DPoS) mechanism, where block producers are decentralized entities that govern EOS. They perform the same function as miners or stakers in a PoW and PoS mechanism.

How Will the New Tokenomics Work?

There are several problems that led to the proposal  of the new EOS tokenomics plan.

Firstly, out of the circulating supply of over 1.1 billion, only 135 million is active. This is because on-chain users do not receive proper incentives. Secondly, there are no new use cases for EOS which would make use and absorb its inflation.

Finally, the high liquidity and expectation of inflation has caused the market cap of EOS to plummet, despite interest from traders. This is notable when looking at the discrepancy between market cap and volume. As of the time of writing, EOS ranks #84 in market capitalization but #25 in volume.

EOS Supply Distribution
EOS Distribution | Credit: X

The new proposal will fix the maximum supply at 2.1 billion. So, 950 million new EOS tokens will be minted and distributed.

The biggest share of these tokens, 16.7% will go to the RAM market,  while 11.9% will be allocated for staking rewards for both EOS and RAM. This will tackle the second issue listed above, that in which there are no new use cases for EOS.

However, it seems the inflation issue will still be persistent even with the new vesting plan. At launch, there will be 1.6 billion EOS tokens. This will cause a lump-sum increase in supply of nearly 40%, possible to cause further sell pressure for the EOS price.

EOS Supply Schedule
EOS Vesting Schedule | Credit: X

Then, the supply will gradually increase over the next 12 years until it reaches 2.1 billion. This amounts to an annual inflation of 2.6%, which while lower than the current 4% inflation, is still significant. Also, if we include the lump-sum increase in this calculation, the actual inflation of 6.3% will be higher than the current inflation.

The proposal addresses the issue of a maximum supply but does not resolve the problem of annual inflation until that maximum supply is reached. The EOS price surged 15% following the proposal of the new tokenomics plan, possibly due to increased interest in the project.

EOS Nearly Falls to All-Time Low

As evidenced by its precipitous fall in the market capitalization rankings, the EOS price action has been extremely bearish since the all-time high in 2018. Firstly, the price did not reach a new all-time high in the 2020 bullish cycle. Rather, it culminated with a lower high of $14.86 in May 2021 (red icon).

EOS bounced at its all-time low support of $0.55 in September 2023 (green icon), breaking out from a descending resistance trend line in the process. While this is a bullish development, EOS still trades well below its 2023 lows.

EOS Price Bounce & Breakout
EOS/USD Weekly Chart | Credit: TradingView

Despite this underperformance, the RSI and MACD finally show some bullish signs. The RSI bounced at 50 from above (green circle) and the MACD crossed above 0 for the first time since 2021.

EOS Price Prediction: Can EOS Reclaim $0.90?

The daily time frame chart presents a mostly bullish outlook. This is because EOS reclaimed an ascending support trend line that has existed for 190 days. This happened after EOS fell below it on April 17 (red circle). These reclaims are often followed by notable upward movements.

However, while EOS increased 15% after the proposal became public, it has created a long upper wick, failing to sustain the increase above $0.90. The $0.90 area has intermittently acted as both support and resistance (red & green icons) since the start of the year.

So, a breakout above it will go a long way in confirming the trend is bullish. This can lead to an increase to the next resistance at $1.15.

EOS Price Daily Time Frame Reclaim
EOS/USD Daily Chart | Credit: TradingView

The MACD supports the possibility of a breakout, since it has made a bullish cross. On the other hand, the RSI is increasing but has not moved above 50 yet (green circle), which will be needed to confirm the bullish trend.

Finally, the decrease since March resembles a completed A-B-C correction. So, indicators readings, the price action and wave count in the daily time frame all suggest EOS will break out and close above $0.90.

EOS Back in the Spotlight

The new tokenomics plan is a step in the right direction in addressing inflation, though it will take 12 years until the maximum supply is reached. Nevertheless, EOS surged notably after the news was released, so the proposal brought some attention to it.

EOS has reclaimed a long-term diagonal support trend line after previously falling below it. If it reclaims $0.90 next, it can continue increasing toward $1.15. A breakout above this level can cause the increase to become parabolic due to the lack of long-term resistance.

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