As a seasoned researcher with over two decades of experience in the financial markets, I have seen trends ebb and flow, and I must admit that Joe Consorti’s analysis on Ethereum has piqued my interest. While I don’t necessarily share his doomsday scenario for Ethereum, I can appreciate the valid points he raises.
Joe Consorti, a cryptocurrency analyst at The Bitcoin Layer who also advises self-custody app Theya, has shared a detailed analysis titled “The Agonizing Demise of Ethereum.” This piece, published on X, outlines why he thinks Ethereum might be headed for a protracted and uncomfortable end. The article contrasts Bitcoin and Ethereum, highlighting their underperformance and waning market enthusiasm towards Ethereum.
Why Ethereum Is ‘Dying’
In his examination, Consorti first emphasizes the significant disparity in performance statistics between Ethereum and Bitcoin over the last year. While Ethereum has seen a 10.6% decrease in worth since January, Bitcoin has experienced a notable jump of 42%. This discrepancy is further emphasized by the ETH/BTC ratio, which has recently dipped below the significant 0.05 level, a point that has traditionally held importance for both assets. Consorti suggests that this figure signifies more than just a simple number; it symbolizes the evolving equilibrium of power within the cryptocurrency market.
“The durability or long-term success of Ethereum and the entire cryptocurrency market can be best measured by comparing Ethereum to Bitcoin (ETH/BTC). By eliminating dollars from this comparison, we can observe that the overall crypto market is struggling to maintain its dominance. The ETH/BTC ratio has dropped below the significant 0.05 level, which although arbitrary, has significantly influenced the trading patterns of these two assets over time.”
According to Consorti, the reasons for investor interest in cryptocurrencies differ significantly. The storyline behind Ethereum has primarily revolved around its technological innovations and possible uses, such as smart contracts and decentralized finance. However, Consorti proposes that this narrative no longer holds the same appeal for investors as it used to, resulting in a decrease of excitement.
While some investors are showing decreased interest in Ethereum ETFs, as evidenced by over $110 million in net outflows over an 8-day period, Bitcoin ETFs have been a different story. Instead of experiencing outflows, they’ve seen inflows, amassing around $750 million. The allure of Bitcoin lies in its unique characteristics: it’s a decentralized, limited digital asset, often referred to as “absolute scarcity” by analyst Consorti. This could suggest that investors find more value and confidence in Bitcoin compared to Ethereum ETFs at this time.
A significant part of Consorti’s reasoning focuses on the monetary policies of Ethereum and Bitcoin. The switch to a Proof of Stake (PoS) consensus mechanism by Ethereum in 2022 initially created a deflationary supply system. However, this proved temporary as an update afterwards boosted Ethereum’s supply by approximately 200,000 ETH over five months. Consorti also notes that the ‘ultrasound money’ concept has lost its appeal.
He criticizes the frequent changes of monetary policies, contrasting it with Bitcoin’s fixed supply of 21 million coins, which he argues offers investors a reliable hedge against inflation and monetary debasement. This makes BTC appealing to everyone. “Bitcoin’s fixed monetary policy and absolutely scarce supply schedule are a breath of fresh air for investors who are keen on hedging themselves from unfettered monetary debasement. While ETH ETFs are off to an abysmal start, Bitcoin ETFs have managed to grab the number 3 and 9 spot in YTD net inflows amongst all US-based ETF products,” Consorti notes.
Consorti’s analysis emphasizes the increasing financialization of Bitcoin. He talks about current events like Nasdaq’s application for Bitcoin options trading, demonstrating Bitcoin’s expanding presence within traditional financial systems. This move not only strengthens Bitcoin’s credibility but also its allure as an investment choice compared to Ethereum, whose ecosystem has weakened along with the drop in the value of its native token.
At press time, ETH traded at $2,522.
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2024-08-28 20:46