Will the deflationary monetary strategy of Ethereum have an influence on Bitcoin?


Bitcoin and Ethereum, the two most popular cryptocurrencies, have long been contrasted in terms of performance. Several members of the community believe that if Ethereum adopts a different monetary policy after the improvement, the asset will become deflationary, intensifying the competitive narrative of both cryptocurrencies. Indeed, for its continual improvements, improvements, and many use-cases, famous businessman Mark Cuban predicted that Ethereum would become the more popular cryptocurrency.

Furthermore, TechCrunch creator Michael Arrington recently noted,

“A lot of things are happening with ETH this year, way more deflationary of an asset than Bitcoin. So that’s why we’re really excited about Ether.”

On-chain expert Willy Woo recently suggested in a podcast that Ethereum has been competitive with Bitcoin as a store of value asset since 2017. Following that time, the Ethereum network has witnessed substantial growth, and ETH use has risen in line. Woo went on to say,

“Even though it’s a smart contracts network and we have DeFi running on it, I think a lot of the value that has accrued to Ethereum is really people wanting to hold it locking that up and that certainly impacts the valuation metrics if you’re going to reduce the inflation significantly.”

Source: Woobull Charts

For more than a year, the Sharpe ratio of Bitcoin and Ethereum has remained quite close, as shown in the graph above. Nonetheless, at the time of publication, Bitcoin (2.39) was somewhat higher than Ethereum (2.17), signaling a modest advantage.

Rafael Schultze-Kraft, co-creator and CTO of Glassnode, on the other side, stated,

“I’m more on the side that those [BTC and ETH] are not competing networks… I still view it [ETH] as on the sides and not grabbing capital off Bitcoin, at this stage at least.”

Rafael, on the other hand, ascribed the increased interest among market players to advances on the Ethereum network. Lark Davis, a crypto-investor, previously posted something similar.

Woo pointed up another opposing pattern, saying,

“… I have seen that it [ETH] is becoming a choice for corporate treasuries, where previously the conversation was just Bitcoin.”

The two biggest digital currencies proceed to be among the most liquid and long-term high-performing assets, and businesses diversifying their balance sheets by introducing Bitcoin are now taking into consideration Ethereum as a reasonable option. Both Bitcoin and Ethereum had dropped upwards of 7% in the previous week alone and were selling at $34,452.87 and $2503.60 at the time of writing.


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