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Recently, the cryptocurrency landscape has witnessed varied investment behaviors among major bitcoin and ethereum holders. This has sparked a series of speculations and discussions among crypto enthusiasts and experts.
While bitcoin tycoons, those with 1,000 or more btc, have generally held onto their portfolios, there have been cases of sharp declines, potentially attributed to events like the FTX debacle or capitalizing on the 2021 bull trend. ethereum tycoons, On the contrary, they have been unloading their holdings, with those holding 1,000 or more eth experiencing a notable downward trend since 2020.
Amid these observations, many influential voices from the bitcoin community took the stage to criticize ethereum and its community. Steven Lubka of bitcoin-based financial service Swan shed light on a trend: several wealthy individuals are contemplating a switch from eth to btc. This inclination, he argued, is driven by the increasing regulatory pressures facing ethereum, a problem from which bitcoin remains relatively insulated.
Complementing this, Jesse Shrader of boths, the Lightning Network data analysis firm, emphasized bitcoin‘s primary purpose as an improved monetary system. Meanwhile, he argued that ethereum, with its intricate layers, could be caught up in its own complexities, especially when it comes to smart contracts and major protocol overhauls.
However, some argue that the metrics cited may not tell the whole story. Kunal Goel, representing Messari, questioned whether Glassnode’s data had been calibrated to take betting into account. He clarified that on-chain data could misinterpret the transfer of assets to a staking contract as a sale, although in reality it is not. Given that ethereum requires locking 32 eth in a contract to aid in transaction verification, this could be a major factor behind the observed decline in large-scale stakeholder holdings.
André Dragosch of Deutsche Digital Assets (DDA) strengthened this view, addressing the increase in eth allocation in smart contracts. He highlighted Glassnode’s failure to account for ethereum within smart contracts, highlighting that the percentage of eth held by major addresses has not decreased.
In essence, the preliminary data might seem to favor one narrative, but upon closer inspection, it is evident that bitcoin and ethereum stalwarts continue to rely heavily on their respective digital assets.
The vision of Benjamin Cohen
Benjamin Cowen, of the popular channel “Into the CryptoVerse”, agrees that ethereum‘s performance has been a topic of concern for some, especially when compared to the strong state of bitcoin. Historically, bitcoin has been around longer than ethereum and has consistently maintained a higher market cap. This longevity and its unchanged protocol make bitcoin a less risky bet compared to ethereum, which has seen significant changes to its ecosystem recently. ethereum‘s valuation compared to bitcoin has been falling, suggesting a lack of confidence among some investors.
Cohen notes that the changing dynamics between ethereum and bitcoin are evident in the ethereum to bitcoin valuation chart, which has shown a pattern of lower highs and lower lows. This trend indicates that ethereum has underperformed bitcoin.
The deflationary narrative
One of the main selling points of ethereum has been its deflationary nature due to the EIP-1559 update, which was supposed to make eth more scarce by burning a portion of the fees. However, Cohen notes that this narrative has recently changed: the supply of eth has increased, meaning it is no longer in a deflationary state. This change could be attributed to lower activity on the ethereum blockchain and, consequently, fewer transactions and lower fee burn.
ethereum‘s dominance
ethereum‘s dominance in the cryptocurrency market has been waning. From 2019 to 2023, ethereum‘s dominance has seen significant declines, suggesting that other coins could be overtaking its position. In contrast, bitcoin‘s dominance has been bullish, staying above its bull market support band throughout the year, hinting at its strong position in the market.
Outlook for ethereum
Cohen maintains that while the ethereum-USD value may seem like a positive point to some, it does not necessarily mean a positive narrative for ethereum. Even if bitcoin recovers and momentarily lifts ethereum‘s dollar value, ethereum‘s valuation to bitcoin could still be affected, leading to further weakening of ethereum.
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