Blockchain analytics firm IntoTheBlock says this month will be a defining moment for Bitcoin and Ethereum with respect to their battle for dominance over the crypto markets. Bitcoin reigns supreme as the world’s leading cryptocurrency in terms of market capitalization at $722.7 billion while Ethereum maintains second place at $292.7 billion.
Analysts at IntoTheBlock suggest that Ethereum’s EIP-1559 update, slated for August 5th, could optimize ETH’s tokenomics to a point where investors start viewing it as more of a store of value.
EIP-1559, part of the London Hard Fork upgrade, features changes to Ethereum’s fee structure including a mechanism that burns or destroys ETH instead of sending it to miners and others on the network as rewards.
“With the base fee being burnt, higher Ethereum demand can potentially result in lower supply. This in turn disincentivizes spending ETH in the short-term, allowing fees to cool down and supply to increase up to equilibrium. By doing so, EIP-1559 establishes a dynamic monetary policy. Although this may not be as predictable as Bitcoin’s fixed supply schedule, this shift in issuance enables Ether holders to benefit more clearly from demand for the fees it generates.”
According to IntoTheBlock, the new monetary structure that EIP-1559 aims to bring to Ethereum raises the probability of a “flippening”, or an overtaking of Bitcoin’s market cap.
“Being the first step towards decreasing Ether’s inflation, it is feasible to believe that more and more investors will start seeing its potential as a store of value. Ultimately, this would influence the way Ethereum is valued and bring forth higher chances for the flippening.”
The analytics firm also takes note of the fact that the number of Ethereum holders has surpassed the amount of Bitcoin holders. According to IntoTheBlock, this is a sign of strong network effects on Ethereum, despite Bitcoin leading in terms of “core functionality”.
“As the number of holders of Bitcoin and Ethereum [grows], their networks become more valuable as there are more potential ways for their users to transact or connect with one another. In this end, Ethereum has also managed to surpass Bitcoin…
This is likely to be the case as Ethereum supports broader use-cases than Bitcoin. Ecosystems around NFTs and DeFi have attracted several users for Ethereum and amplified its network effects. That being said, though, Bitcoin does continue to lead over Ethereum in its core functionality.”
Currently Bitcoin dominance is at 46.6%, down from 72.2% at the start of the year, while ETH dominance is at 18.9%, up from 10.7% in January, according to TradingView.Don't Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox
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