The cryptocurrency market has gone through a bloodbath in recent days, whereas just a week ago, we were celebrating the ATH of various cryptos, including BTC, ETH, Doge, and XRP. Possible reasons for the big sale have been discussed in dozens of articles, so we’ll let it slide for now. But amid fear and hesitation, one cryptocurrency stands out with resilience and independence: Ethereum.
With Bitcoin showing weakness, BTC’s dominance fell below 50% for the first time since January 2018. ETH was one of the top performing altcoins, posting a 9.5% return over the past seven days. This could be the result of investors seeking hedge in altcoins and the rise of DeFi use cases.
Ether will become a deflationary asset
Both Ether and Bitcoin are decentralized digital currencies that use blockchain. But while Bitcoin aims to replace fiat money, Ether was created to trade as a digital currency and to support the Ethereum network. The Ethereum network enables the deployment of smart contracts and decentralized applications. Some of the popular DeFi apps include Uniswap and MakerDAO, and the NFTs that made the news headlines last month are also part of the Ethereum blockchain.
Now one more point is added to Ether’s scoring list.
Bitcoin believers used to sell the story that Bitcoin’s limited supply allows it to hedge against inflation. The supply and demand relationship tells us that in most cases when the supply of an asset is greater than the demand, the price will be lower, otherwise the price will increase. The increase in the price of Bitcoin encourages people to buy more, which reduces the supply in the market, which in turn increases the price. This is one of the fundamentals of Bitcoin price rallies.
Next July, the Ethereum Enhancement Proposal (EIP) 1559 will be packaged with the London hard fork. In EIP 1559, the “base rate” will fluctuate based on network congestion and is set by wallet providers. You can add an additional “tip” to the base fee as an incentive for miners to make your transaction process faster. Base fees will burn after harvest, so ether will become scarcer over time.