The ratio between bitcoin and ethereum has been falling lower and lower, dropping below 0.02 to a level eth first reached all the way in march 2016, just months after it had launched.
Part of the reason why eth is not keeping up might be because for now it’s bitcoin’s show, but it may also be because eth’s inflationary rate has been a lot higher than bitcoin.
For much of last year, which is when most of the ratio losses occurred, ethereum’s new supply was at about 7% of total supply.
Issuance was reduced after much discussion, but its inflationary rate is still 4.7%, while bitcoin is at about 3.8%.
Not a huge difference now, but there’s the demand equation which in part might be based on pricing-in future value as well as current value.
The halvening is one big event everyone is looking forward to in bitcoin as block rewards are algorithmically cut in half in spring next year.
In ethereum instead the rate of new supply might increase slightly this winter, although that might be countered by old supply being locked for staking.
Then, as ethereum does not have an algorithmically set supply schedule, just what will happen is not too clear, but whatever it is, it appears likely to be after the halvening.
So Vitalik Buterin, ethereum’s founder, said a 2/3rd reduction is “absolutely viable” at the end of 2020. While Justin Drake, an eth researcher, said there might be a 10x reduction in 2021.
There’s the difficulty bomb which should kick in as well around the beginning of next year, with it unclear whether that will be delayed without an issuance reduction or whether there will be another “discussion” on whether to reduce it.
That lack of clarity is one contributing factor, with another being that for now eth is about as limited in capacity as bitcoin.
They plan to address that with sharding, but just how decentralized the design will be in the end remains to be seen.
On the other hand, this is all a bit too much of an echo of 2015 when people started becoming disillusioned with bitcoin.
After all the euphoria of 2013 and the disbelief of 2014, people started getting a more realistic view of bitcoin and its capabilities in 2015, with it then aided by the halvening as well as the rise of ethereum in 2016.
So ethereum may well roar again, but whether it will, remains to be seen.