- The Merge not only brought relief to the environment, it also reduced ETH’s net inflation rate by removing mining rewards and burning transaction fees will now take place.
- ETH annual net issuance “fell in a range from 0% to 0.7% compared to 3.5% previously.”
- Bitcoin’s inflation rate for this year is estimated to be 1.75%.
One of the biggest problems facing the current world economic system is inflation, which leads to rising prices and impoverishing wages. Bitcoin, with a limited “print”, raises the flag of being an asset with the ability to counteract it.
The creation of the unknown Satoshi Nakamoto will not know more than 21 million units which makes it valuable. Its divisible capacity is also highlighted, its easy transport and transfer, for example. Though, specialists consider that a rival was born: Ethereum (ETH).
ETH is emerging as a refuge against inflation
The second cryptocurrency on the market, with a capitalization of more than $162 billion dollars, underwent a radical change in mid-September: the blockchain left behind the Proof of Work to give way to the Proof of Stake. Vitalik Buterin forgot the miners to welcome the validators.
This change represents a relief for the environment, since energy consumption was reduced by around 99%. Although it may also have strengthened the digital asset for the future.
The Merge not only changed the above, but also reduced the net inflation rate of ETH (the new supply is divided by the existing one). Why? Mining rewards have been removed and burning of transaction fees will take place. Thus, in this way, Bitcoin could lose its place of privilege. Although, if it happens, it is a long way off: the market capitalization of BTC today is more than double that of its rival.
ETH emission is reduced
According to Lucas Outumuro, head of research at the cryptocurrency data and analysis company intotheblock, ETH annual net issuance “fell in a range from 0% to 0.7% compared to 3.5% previously.”
From The Merge, the site Ultra Sound Money recorded that 8,253 ETH went to the market, which represents an inflation of only 0.19%. These tokens were left in the hands of validators and at current prices they mean just over $11 million dollars.
Cryptos, a refuge against inflation
Ethereum politics goes against the grain of the rest of the economic world, and not necessarily the digital one. It is worth watching the main news from any country, be it Latin America, the United States or Europe, and you will notice the concern about inflation. The only solution that many see is to continue printing, which aggravates the panorama: the government of Joe Biden has doubled its balance sheet since March 2020. “Bitcoin fixes this”, as the crypto saying goes.
The inflation rate of Bitcoin for this year is estimated to be 1.75%, although this in little more than 100 years will stop when the totality has been mined. What will happen at that time with the US dollar or the Mexican peso?
“If Ethereum goes deflationary, we could see a lot of institutional money pouring into ETH in the next two years”, stated Maximiliano Stochyk Duarte, head of marketing at ChainPort and a cryptocurrency investor since 2014.
As he continued:
“BTC will continue to be the best cryptocurrency to store value without the huge volatility that the whole market has, but I think that both ETH and BTC can act together if we want mass adoption”.
Under the Proof of Work system, Ethereum’s daily issuance was at 13,000 ETH, as reported by the Ethereum Foundation. Almost 15 days after The Merge, that number is still far from being reached: the average every 24 hours is 1,600 ETH.
The price has not yet reacted to the change
Beyond all the virtues listed, the price of Ethereum has not had the expected positive impact so far. It has even shown worse numbers than its “main competitor”.
At the time of writing this article, ETH was trading at $1,350 dollars, with a small growth in the last 24 hours and +2.50% weekly. Bitcoin, meanwhile, was valued at $19,500, with growth in the last 7 days of 3.33%.
Despite the fact that the price has not yet responded in the expected way, specialists have no doubts in assuring that ETH will face BTC. Nor that it will work as a backup against inflation.
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