Joe Consorti, analyst at The Bitcoin Layer and advisor to the self-custodial app Theya, released A scathing critique of Ethereum’s future compared to Bitcoin, highlighting why he believes Ethereum is facing a “slow and painful death.” His analysis, published on X and titled “The Slow and Painful Death of Ethereum,” compares the two leading cryptocurrencies, highlighting the significant underperformance and waning market interest in Ethereum.
Why is Ethereum “dying”?
Consortie begins his analysis by highlighting the stark contrast in performance metrics between Ethereum and Bitcoin over the past year. According to Consortie, Ethereum has suffered a 10.6% decline in value since January, while Bitcoin has seen a massive 42% increase. This discrepancy is evident in the Ethereum/Bitcoin ratio, which recently fell below the 0.05 level, a critical threshold for both assets historically. Consortie argues that this ratio is more than just a number; it represents the shifting balance of power in the cryptocurrency market.
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“The most important measure of the staying power of Ethereum, and all ‘cryptocurrencies’ by extension, is ETH/BTC. By removing dollars from the denominator, we can clearly see that from a market dominance perspective, all ‘cryptocurrencies’ are on life support. ETH/BTC has sunk to the key 0.05 level, an arbitrary but crucial threshold for the trading behavior of both assets over the years,” Consortie writes.
Speaking about the reasons, Consorti points to the different narratives that have driven investors’ interest in both cryptocurrencies. Ethereum’s narrative has largely been built around its technological advancements and potential applications, from smart contracts to decentralized finance. However, Consorti points out that this narrative no longer resonates with investors as it once did, leading to a decline in hype.
On the other hand, Bitcoin continues to attract investors with its clear value proposition of being a decentralized and finite digital asset, which Consortie refers to as “absolute scarcity.” The analyst points to the performance of U.S.-based exchange-traded funds (ETFs). He notes that U.S.-based ETFs have seen steady net inflows, totaling over $110 million over an 8-day period, indicating waning investor confidence. In contrast, Bitcoin ETFs have not only launched successfully, but have continued to attract significant capital, accumulating around $750 million in net inflows.
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Another pivotal aspect of Consortie’s argument revolves around the monetary policies of Ethereum and Bitcoin. Ethereum’s switch to a proof-of-stake (PoS) consensus mechanism in 2022 initially led to a deflationary supply mechanism. However, this did not last long, as highlighted by a subsequent upgrade that increased Ethereum’s supply by 200,000 ETH over five months. “The ‘ultrasonic money’ narrative also died on the vine,” Consortie adds.
Consortie criticizes the frequent changes in monetary policy, comparing it to Bitcoin’s fixed supply of 21 million coins, which he claims provides investors with a reliable hedge against inflation and depreciation. This makes Bitcoin attractive to everyone. “Bitcoin’s fixed monetary policy and extremely scarce supply schedule are a breath of fresh air for investors keen to protect themselves from unchecked depreciation,” Consortie notes. “While Ethereum ETFs have gotten off to a rocky start, Bitcoin ETFs have managed to rank third and ninth in net inflows year-to-date among all U.S. ETF products.”
The broader financialization of bitcoin is also a major theme in Consortie’s analysis. He discusses recent developments such as Nasdaq’s filing to allow bitcoin options trading, which reflects bitcoin’s growing integration into mainstream financial markets. Consortie notes that this not only enhances bitcoin’s legitimacy, but also increases its appeal as an investment vehicle compared to Ethereum, which has seen its ecosystem decline in tandem with the price of its native token.
At the time of publishing this report, ETH was trading at $2,522.
Featured image created using DALL.E, chart from TradingView.com