According to the research conducted by some academics at Australian universities, Ethereum (ETH) -2.54% has some deflationary characteristics what makes it a good store of value, while Bitcoin (BTC) -3.41% turns out to be more of a hedge against inflation:
"With up to half of the network's blocks destroying more Ethereum than is created, the notion that Bitcoin offers the best inflationary hedge among the cryptocurrencies is increasingly coming under threat. Such protocol improvements could pave the way for more cryptocurrencies to improve their anti-inflationary characteristics, becoming better stores of value than Bitcoin." (CoinMarketCap, 2021)
The authors of this academic paper base their arguments on the latest upgrade of Ethereum (Ethereum Improvement Proposal 1559), that changes the way “gas fees” are estimated. Some of the fees that are paid by users are now burned and taken out of circulation forever. The upgrade significantly reduces the supply of new Ethereum coins hitting the market, which makes Ethereum deflationary.
The authors expect the ETH issuance rate to reach 0.98% over time, while BTC’s supply is expected to rise by 2% in the same period.
There have been periods since EIP-1559 when the amount of ETH burned exceeded what was created through block awards.
As of December 3, 2021, a total of 1,095,029 ETHs have been burned - and their cash value currently stands at $4.2 billion. As ethburned.info states: "The more Ethereum is used ... the more ETH is burned." (CoinMarketCap, 2021)
While the price of Bitcoin has increased about 94% since the beginning of 2021, the value of Ether has risen more than 540%.
Also, JPMorgan believes Ether may turn out to be a more attractive cryptocurrency to investors than Bitcoin. The investment bank believes that Bitcoin, as a digital gold, will come under pressure from the potential normalisation of monetary policy, while Ether may be better able to withstand these headwinds as the value of Ether is derived from applications - including gaming, non-fungible tokens, DeFi, and stablecoins.
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*Stock percentage taken on 08.12.2021 at 10:45.
*Sephton, Connor (3. December 2021). CoinMarketCap: Why ETH Could Be Better Store of Value than BTC. Last viewed on 08.12.2021 on https://coinmarketcap.com/alexandria/article/why-eth-could-be-better-store-of-value-than-btc.
