Bitcoin aims to become the global reserve currency and Ether aims to become the infrastructure of the global digital economy. However, the market value of these two is different, and this article will analyze the reasons why BTC’s market capitalization was surpassed by ETH.
Perhaps ETH overtaking BTC came earlier than expected.
Bitcoin’s goal is to become the global reserve currency, and Ether’s goal is to become the infrastructure of the global digital economy. Both visions are huge, so it would be better to compare the likelihood of the networks gaining their respective market shares.
Relative to its security budget, Bitcoin has never generated meaningful transaction revenue, instead heavily subsidizing security with block rewards. The current model is unsustainable and undermines its potential to become a global reserve currency.
Ether has become the base layer of the largest dApp ecosystem and has the best economic system of any cryptocurrency.
The network currently boasts.
$24.6 billion in DeFi TVL
84.7 billion in stablecoins
In 2022, it contributed to more than.
1.2T USD of DEX spot trading volume
526 billion in NFT volume.
I expect Ether to surpass Bitcoin by the end of the next cycle. Ether is about $150B behind in market cap, but the merger will be a strong driver of ETH fundamentals with its outstanding performance.
I expect Ether to overtake Bitcoin by the end of the next cycle. Ether is about $150 billion behind in market cap, but a strong post-merger performance will be a strong driver of ETH fundamentals.
If you look at just the dollar value of miners’ earnings, Bitcoin seems to be doing better.
Since 2016, miners’ annual revenue has been trending upwards.
But an analysis of the revenue composition reveals the problem behind …… Bitcoin heavily subsidizes security through block rewards. 95% of bitcoin miners’ rewards come from inflationary block rewards, while only 5% is real revenue from transaction fees.
PoW by design consumes a lot of energy. This is great for security, but it creates forced sellers because miners need to offset their production costs (electricity). Even with low inflation, 95% of all miner sales are newly minted BTC because little to no fees are incurred.
Bitcoin does not support smart contracts, so BTC is the only form of value that can exist on the network. Users must pay a fee on each transaction to transfer BTC. therefore, fee generation is dependent on the speed of circulation of BTC, yet users claim to be hoarders ……
In contrast, ETH is traded as a currency in the digital economy. Users pay ETH to transfer ETH, stablecoins and other tokens, or to interact with DeFi applications. Ether extends the possible actions beyond just sending, receiving and holding BTC.
During bull markets, Ether’s real revenue percentage increases along with total revenue, highlighting the reflexive nature of the network. However, when on-chain activity decreases, inversity suffers, as seen by the pullback in true revenue percentage in 2022.
Dividing 2022 into pre-merger and post-merger eras shows how Ether can address inflation through the diversification of verifier revenue. Post-merger, Ether validators receive 62% of their real revenue from transaction fees, ETH burns and MEV payments.
ETH burn and MEV are also correlated with the level of activity on the chain. More trading volume leads to higher base fee burn and more MEV opportunities. However, during the bear market, Ether net issuance was near zero and created positive value for pledgers.
The migration to PoS also resulted in a $1.7 billion reduction in ETH emissions in just 117 days. This is important for liquidity flows, as ETH requires less buying pressure to maintain the same price. Impact on Inflation?ETH has a 30-day annualized inflation rate of up to 0.00%.
Again, Bitcoin isn’t dead. It is widely adopted by individuals, public companies, and countries/regions from 2021-2022. Its community will likely work to prioritize sustainability in the near future, but its current trajectory will cause it to lag relative to ethereum.