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Injective Price Jumps 60% as INJ 3.0 Hits Mainnet: Wording Hides Truth Behind Deflation

Last Updated April 24, 2024 10:22 AM
Valdrin Tahiri
Last Updated April 24, 2024 10:22 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • INJ 3.0 went live on the mainnet after a successful governance vote passed on April 23.
  • The update is purported to make Injective one of the most deflationary assets in crypto.
  • INJ’s price bounced over 60% since April, validating the previous all-time high as support.

INJ 3.0 went live on the mainnet on April 23. It is poised to address the persistent challenge of inflation by proposing a reduction in the on-chain parameters governing the creation of new Injective tokens.

The INJ price has increased over 60% since its April lows, but there are concerns that the long-term trend is still bearish, and the increase is part of a larger corrective structure.

Is INJ 3.0 Really Deflationary?

Currently, the minimum INJ inflation rate stands at 5%, slated to decrease to 4% within the next two years. Simultaneously, the maximum inflation rate, currently at 10%, will drop to 7% over the same period. Drawing inspiration from Bitcoin’s model of reducing inflation with each halving event, this upgrade seeks to emulate its success.

In the official announcement , it is stated that INJ 3.0 “dramatically reduces the supply of Injective’s native token”. However, this does not seem to be the case. The proposal will reduce this inflation rate between 4 and 7%. However, it will not make the token deflationary, since deflation occurs when inflation is below 0%, meaning the token supply decreases.

So, the proposal will reduce the new supply issuance of Injective’s native token.

INJ Circulating Supply
INJ Supply | Credit: IntoTheBlock

Currently, the INJ circulating supply  is at 90 million, an increase of over 12% in the past year. When comparing it to this rate, INJ 3.0 will be helpful in combating the issue of high inflation.

But, the announcement  also stated that INJ aims to surpass the monetary properties of Bitcoin. Since the fourth halving, Bitcoin’s annual inflation is down to 0.85% . So, even with the new proposal, INJ does not come close to this inflation rate.

Ethereum Deflation
ETH Supply | Credit: Ultrasound.Money

An asset that is actually deflationary is Ethereum. In the 587 days since the merge, ETH burns outpace issuance by over 440,000, leading to an annual deflation of 0.23%.

Even though more than 5 million INJ tokens  have been burned through its auction mechanism , the token issuance still outpaces the burn, as evidenced by last year’s 12.58% inflation.

Long-Term Bullish Trend Shows Weakness

The INJ price started a five-wave upward movement (white) in June 2022 which continued for 637 days. INJ reached an all-time high of $53 in March before beginning the current correction, ongoing for 42 days.

Even though INJ fell 66% after the high, the correction is too short relative to the upward movement, indicating it may not yet be complete.

INJ Price Long-Term Trend
INJ/USDT Weekly Chart | Credit: TradingView

The weekly RSI and MACD align with this possibility, since they are both trending downward. Additionally, the RSI is below 50 and the MACD has made a bearish cross (red icons).

Nevertheless, the INJ price bounced at the previous all-time high of 21, creating a long lower wick (green icon). So, the price action is still bullish.

INJ Price Prediction: How Long Will the Bounce Continue?

Despite the possibility that INJ is mired in a long-term correction, the price has increased by 60% since its April 13 low. The magnitude of the increase suggests the first part of the correction is over. So, INJ is likely in wave B of an A-B-C corrective structure (black).

Since wave A was a three-wave structure, the move is likely a flat correction, meaning that wave B will retrace to at least the 0.786-0.854 Fibonacci region. Then, INJ can begin the final decrease as part of wave C.

INJ Price Short-Term Movement
INJ/USDT Daily Chart | Credit: TradingView

Such a structure will tackle the issue of the length of the correction relative to the previous increase, since the structure can continue developing for several months. Additionally, it indicates the short-term bounce will continue toward the previous highs.

INJ 3.0 Improves Tokenomics but Price May Struggle Anyway

The INJ 3.0 mainnet release is a significant step forward in tackling the issue of INJ inflation, even if it does not make its tokenomics deflationary. However, the price action suggests the long-term INJ upward movement has ended. Due to the ongoing bounce, the short-term trend is still bullish and can lead to a retest of the previous highs. However, another downward movement will likely happen eventually.

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