Ethereum’s value against bitcoin has seen its ratio drop to the lowest level since March 2017.
As far back as 2016 there were months when ethereum’s ratio was higher, but for months now it has only been downhill.
Ethereum’s value against bitcoin has dropped nearly 10x since the high of summer 2017 with it sidewaying since September, but now appears to have broken down.
Why the second biggest crypto is attracting so much less value is not clear, but there are quite a few things to look forward to for bitcoin that may not necessarily apply to eth.
Return of the Bitcoin?
Bakkt is to launch testing today with the bitcoin settled futures aimed at institutional investors who would be buying and selling in a CFTC regulated environment.
Some say this is priced in, but from observation it is very difficult to accurately price in future demand because only demand itself can meet supply.
In addition, information does not travel at the same speed everywhere and ultimately you can only price in with the amount of funds you are willing to risk.
That’s relevant to the other big day for bitcoin, the first halvening since it went mainstream. That’s now in about nine months, preceded by BCH in or around April 2020.
For ethereum there may be a slight increase in new supply in or around January, with a reduction then perhaps at the end of 2020 or maybe at the beginning of 2021 with it unclear whether it would be a 2/3rds or a 10x reduction.
That lack of clarity is because it would be a human made decision based on estimates of how much security may be needed. For bitcoin, code is law and that law says new supply will halve, security will just have to adapt.
There’s apparently some discussion in ethereum to add what some are calling a tax, while others are calling a needed development fund:
Dean Eigenmann is from Status as far as we are aware, an ICO project that raised close to 177,000 eth in 2017, worth at the time $100 million.
Status has contributed to protocol development, including funding one of the ethereum 2.0 clients, with the above appearing to be just Eigenmann’s opinion rather than anything having to do with Status.
The argument has been that the Ethereum Foundation and all these ICOs have plenty of funds that should last for years, thus there’s no need to increase new supply for eth development.
On the other hand it appears some of the eth1x work is not being funded. We haven’t had time to look at this yet, but on the surface it sounds a bit like internal politics.
That politiking may be one reason why the ratio is dwindling with ethereum lacking what we’d call a feisty bent which can easily be found in bitcoin due to being the first and thus attracting ideologues.
Ethereum has instead taken the approach of being more tech focused, which can have the benefit of more flexibility.
ETH Growing Pains
For eth, staking is something to look forward to as that can reduce supply by it being temporarily locked with a good estimate perhaps being about 3% of its total supply and maybe 10% at the high end.
In addition as the second crypto and as the only crypto besides bitcoin to be classified as a commodity, ethereum can have the benefit of following bitcoin in its path to mainstream finance.
Moreover sharding can be a pretty big Joker card if it does work to a great extent if it can scale while remaining decentralized with that defined as an ordinary coder being able to chain-split fork the entire network without requiring outside investment.
Currently doing so would be very easy, but whether the same can be said for the sharded network, is not too clear.
Bitcoin of course has its own problems regarding scalability, but being second and having the same problem is quite different than being first especially if the latter – although it does have governance problems – doesn’t have such governance problems extend to issuance itself.
Bitcoin too however at this stage of a four year old went through kind of the same thing as eth is doing now, including the debates regarding development funding.
For bitcoin, all those aspects were resolved and it came out a lot stronger. Whether the same will be said for eth, remains to be seen.