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26 January 2022
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Ethereum is a better store of value than Bitcoin, academic research shows

  • Recent research conducted by four Australian researchers concludes that Ethereum is a better store of value than Bitcoin.
  • “Ethereum provides better inflationary hedging properties than Bitcoin, and Ether may therefore offer superior long-term value storage than Bitcoin, ” said the report.

Ethereum, the second-largest crypto by market cap, has been tipped by several experts including billionaire investor Mark Cuban, as second to none in terms of utility. Its smart contract has been used to power several blockchain-based projects like Decentralized Finance (DeFi), and Non-Fungible Tokens (NFTs). But in terms of a store of value, there has been a divided opinion among experts as Bitcoin is largely viewed as a better alternative to Ethereum and other cryptocurrencies.

Recent research conducted by four Australian researchers concludes that Ethereum is a better store of value than Bitcoin. According to the research paper, the recent EIP-1559 upgrade in August has been the reason for this conclusion. The EIP-1559 upgrade saw over one million ETH out of the 118,583,580 circulating supply burnt, and a portion of its transaction fees burnt as well.

The report stated: 

Annualizing the rate of Ethereum creation since EIP-1559, the expected increase in the total Ethereum supply is only 0.98%, being less than half the 1.99% increase in Bitcoin supply which is almost certain in the same period.

Roughly 50 percent of the transaction fees of the 12,000 newly minted ETH per day were burnt according to the report. It was further stated that more ETH will be burnt as its robust ecosystem of decentralized finance sees increased demand. 

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If Bitcoin is “sound money”, Ethereum is ” Ultra-sound money”

The rampant money printing linked to the COVID-19 pandemic has recently led to higher inflation rising to 6.2 percent in the US by October. Bitcoin has during this period seen higher interest among institutional investors as it is believed to be a perfect hedge against inflation. However, the research states that ETH has a better store of value, and institutions are beginning to choose digital asset for this purpose.  

Ethereum provides better inflationary hedging properties than Bitcoin, and Ether may therefore offer a superior long-term value storage than Bitcoin.

According to Shark Tank investor and now an ambassador for FTX exchange Kevin O’Leary, if Bitcoin is considered as a “Sound Money”, then Ethereum is “UltraSound Money”. 

If Bitcoin is sound money because of the 21 million coin supply ceiling, Ethereum enjoys the same benefit now. It’s ultra sound money because there’s no supply floor […]. Ethereum will be thought of like a traditional business and can be analyzed like one, sort of like using a cash flow model

Nikhil Shamapant, an independent ETH analyst, trader and medical doctor from New York City. He believes that ETH will be inflationary as it will spend most of its movement in the medium term in the inflationary environment. 

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