Ethereum Issuance Drops Below Bitcoin’s For the First Time, Why This May Lead to a New Rally

Reynaldo Marquez

3 years ago

2 mins read

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Ethereum has been on a rally for the past week, moving from a two-month low at $1,700 to its current level at $3,223. Several factors have pushed the crypto market into a new rally, but most seem to gravitate around ETH and its ecosystem.

Ethereum ETH ETHUSD — ETH moves sideways into the weekend on the 24-hour chart. Source: ETHUSD Tradingview

After the implementation of EIP-1559, Ethereum’s native token became a deflationary asset due to the change in its fee mechanism. To validate transactions on the network a portion of ETH is “burn”, meaning send to an address that no one can access.

As a consequence, ETH has been gaining traction as a store of value asset, for some experts, even more, efficient than Bitcoin. Researcher Lucas Outumuro has recorded a dropped in ETH’s daily issuance, lower than Bitcoin’s for the first time since its inception.

As the chart below shows, ETH net inflation stands at 3574 ETH (1.11% annualized), and BTC net inflation stands at 900 BTC (1.75% annualized), Outumuro claimed.

The decline in ETH’s daily issuance is attributed to the increase in on-chain activity. The research tracked this down to the surge in the non-fungible token (NFT) related activity.

By 2021, NFTs have become a new mania in the crypto industry with a seemingly high level of adoption from the mainstream.

A couple of days ago, payment giant VISA announced an NFT purchase from the popular collection CryptoPunks. At the same time, EtherRocks, and NFT gaming are contributing to the activity surge in this sector. As a consequence, Outumuro said:

(…) NFT activity has significantly increased Ethereum fees and the amount of ETH being burnt along with them. This has led to several hours where more ETH was burnt than issued, effectively making it deflationary during brief periods of time.

Ethereum, From Digital Oil To “Ultra-Sound Money”

Ethereum has developed a multitude of use cases in different sectors, NFTs, DeFi, blockchain-based gaming, and more. In addition, its recently acquired deflationary nature could lead it to “develop a monetary premium like BTC”, the research claimed.

As NewBTC reported, Ethereum surpassed Bitcoin in other metrics, including daily value settle. The former network has settled up to $24 billion daily, compared to Bitcoin’s $8,5 billion.

This change and increase activity occurred despite Ethereum’s high transactions fees, 10 times higher than the number one cryptocurrency by market cap. Outumuro added:

CHARTThis is also the case for the number of transactions in each blockchain, with ETH being valued more closely to its transaction activity. 5x the number of daily transactions, yet still lagging in valuation.

Additional data also suggest that ETH is more adopted with over 20 million addresses holding it. The research highlighted those addresses could be own an undetermined number of users but can be used as a “proxy to observe growth in a crypto-asset community.

The aforementioned factors strengthen Ethereum’s fundamentals and progressively change how investors value the underlying asset, ETH.

In the coming months, as the network transitions towards ETH 2.0, more factors will contribute to the thesis that ETH has become the ultimate store of value. Outumuro said:

As NFTs and other applications continue to grow on Ethereum, this creates deflationary pressure and reinforces Ether’s monetary premium. Ultimately, this aligns users and holders towards $ETH becoming the store of value of the decentralized internet.

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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