Ethereum 'Ultrasound Money' Pivot Did Not Help ETH Price Beat Bitcoin
Since the 2022 Merge, Ethereum's 'ultrasound money' thesis has faltered as ETH underperformed BTC due to modest supply growth and investor preference for Bitcoin's fixed supply.Summary
The narrative that Ethereum (ETH) would become scarcer than Bitcoin following the 2022 Proof-of-Stake (PoS) transition, known as 'ultrasound money,' has been undermined. While the EIP-1559 fee burn mechanism combined with reduced issuance aimed for deflation, ETH supply has actually grown modestly (0.23% annualized since the Merge) because network activity is insufficient to burn more coins than are issued. This issue is compounded by the migration of activity to cheaper Layer-2 networks, which reduces mainnet burning.
Consequently, ETH has dropped about 65% against Bitcoin (BTC) since the pivot. Analysts suggest investors favor Bitcoin due to its strictly enforced 21 million coin cap, viewing its monetary policy as more predictable than Ethereum's evolving policies. This preference is reflected in ETF holdings, where spot Bitcoin ETFs significantly outpace Ethereum ETFs. Furthermore, ETH's price performance has been underwhelming, failing to sustain new highs, and has been pressured by insider selling concerns, suggesting that reduced issuance alone failed to create sustained demand.
(Source：Cointelegraph)