Joe Consorti, analyst at The bitcoin Layer and advisor to self-custody app Theya, x.com/JoeConsorti/status/1828565032415731799″ target=”_blank” rel=”nofollow”>released An incisive critique on the future of ethereum compared to bitcoin, shedding light on why he believes ethereum is facing a “slow and painful death.” Published on x, his analysis titled “The Slow and Painful Death of ethereum” compares the two leading cryptocurrencies, emphasizing the significant underperformance and declining market interest in ethereum.
Why is ethereum “dying”?
Consorti begins its analysis by highlighting the stark contrast in performance metrics between ethereum and bitcoin over the past year. ethereum, according to Consorti, has seen a 10.6% drop in value since January, while bitcoin has seen a substantial 42% increase. This divergence is underscored by the eth/btc ratio, which has recently dipped below the 0.05 level, a critical threshold for the two assets historically. This ratio, Consorti argues, is more than just a number; it represents the shifting balance of power in the cryptocurrency market.
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“The most important indicator of ethereum’s resilience, and of all cryptocurrencies by extension, is the eth/btc pair. By removing dollars from the denominator, we can clearly see that from a market dominance perspective, all cryptocurrencies are on life support. The eth/btc pair has fallen below the key 0.05 level, an arbitrary but crucial threshold for the two assets’ trading behavior over the years,” Consorti writes.
Discussing the reasons, Consorti points to the different narratives that have driven investor 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 suggests 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 Consorti refers to as “absolute scarcity.” The analyst points to the performance of U.S. spot exchange-traded funds (ETFs). He notes that U.S.-based ethereum ETFs have seen consistent net outflows, totaling over $110 million over an 8-day streak, indicating declining investor confidence. In stark contrast, bitcoin ETFs have not only launched successfully but have continued to attract significant capital, accumulating approximately $750 million in net inflows.
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Another key aspect of Consorti’s argument centers on the monetary policies of ethereum and bitcoin. ethereum’s shift to a Proof of Stake (PoS) consensus mechanism in 2022 initially led to a deflationary supply mechanism. However, this was short-lived, as highlighted by a subsequent upgrade that increased ethereum’s supply by 200,000 eth in five months. “The ‘ultrasonic money’ narrative has also died on the vine,” Consorti adds.
He criticizes the frequent changes in monetary policies, comparing them to bitcoin’s fixed supply of 21 million coins, which he says offers investors a reliable hedge against inflation and currency debasement. This makes btc attractive to everyone. “bitcoin’s fixed monetary policy and absolutely scarce supply schedule are a breath of fresh air for investors who want to protect themselves from rampant currency debasement. While eth ETFs are off to an abysmal start, bitcoin ETFs have managed to grab the third and ninth spots in net inflows year-to-date among all US-based ETF products,” Consorti notes.
The broader financialization of bitcoin is also a key theme in Consorti’s analysis. It looks at recent developments such as Nasdaq’s application to allow bitcoin options trading, which reflects bitcoin’s growing integration into mainstream financial markets. This, Consorti hints, not only enhances bitcoin’s legitimacy but also its attractiveness as an investment vehicle relative to ethereum, whose ecosystem has deteriorated in parallel with the price decline of its native token.
At the time of writing, eth was trading at $2,522.
Featured image created with DALL.E, chart from TradingView.com
