What is the chance that ETH will no longer pay attention to BTC?
- It usually guides the price movement of tokens because traders see it as a reserve cryptocurrency in the market.
- After implementing the EIP-1559 update, Ethereum’s deflationary function will make ETH tokens more scarce.
- The shift to proof-of-stake means that Ethereum’s token economics will not be similar to the current consensus model.
Retail and institutional investors recognize the supremacy of Bitcoin’s token dominance because it has become the preferred token denominator. Although Bitcoin is known as digital gold, in addition to speculation, it also has a reputation for being used on a larger scale. Bitcoin’s market price changes directly affect altcoins, although most transactions are now conducted through stablecoin denominators.
Ethereum is breaking the chain
The correlation between Bitcoin and Ethereum is not a performance indicator, but a main indicator of the importance of the network. Diversifying investment portfolios is tedious because there are few price differences between Bitcoin and other altcoins (including Ethereum).
Su Zhu, an investor and founder of Three Arrows Capital, conducted research and reports on the correlation indicators of Ethereum. Specifically, he emphasized that the correlation between Bitcoin and Ethereum is being eliminated, and claimed that as the market matures, the replacement season will slowly dissipate. In addition, only when Ethereum adds a similar scarcity value to the network economy will it deviate from the Bitcoin standard.
Su Zhu emphasized that the high correlation between Ethereum and Bitcoin occurred when the Ethereum team failed to meet the needs of users. Specifically, the failure to bring Ethereum 2.0 closer to reality in 2020 has made Ethereum more sensitive to Bitcoin’s actions. As reported by CoinMarketCap, as observed in 2021, expectations for the growth of ETH 2.0 and the ETH-based DeFi sector have reduced dependence on Ethereum, reaching a new high of $4,362.
on the other hand
- Cryptocurrency pairings are mainly related to Bitcoin rather than stablecoins
- Before the upcoming network update, Ethereum failed to maintain its bullish trajectory, which indicates that it is not suitable for separation from BTC.
- Even if Ethereum migrates to Ethereum 2.0, PoS and PoW will work together until the migration is completed.
Will proof of stake change things in Ethereum?
Ethereum will change its consensus mechanism and shift from proof of work to proof of stake. In addition, Ethereum will implement a series of upgrades in the transient process, including EIP-1559, whose main function is to reduce the total supply of ETH by burning part of the mining fees.
As emphasized by Vitalik Buterin, new updates and progress in proof of stake will make ETH a “deflationary monetary system.” In addition, Coinmonks reports that the Ethereum protocol will consume 1 million tokens from the total supply each year. Therefore, Ethereum 2.0 can provide additional advantages because native tokens can tend to store value, similar to Bitcoin.
Decoupling requires complete interdependence with Bitcoin and a paradigm shift in user perceptions. For example, Ethereum ICO tokens were highly dependent on ETH activities in the early days. Now, although Bitcoin still affects them, they are less affected by Ethereum.
In addition, Ethereum 2.0 brings another impetus to the token economics of the network. Specifically, users will be incentivized to hold rather than spend tokens to become network verifiers. So far, 200,000 validators have pledged USD 14 billion worth of ETH tokens on the network. Therefore, the current standard diffusion may occur, but the main catalyst is still an unknown variable.
In the cryptocurrency community, the term “fillpening” refers to the story of when Ethereum surpassed Bitcoin to become the most “valuable cryptocurrency”. Traders usually view Ethereum and Bitcoin as “liquidity support” because it can be used as a shield to distribute the rest of the portfolio. Although Bitcoin’s market dominance is still higher than any other currency, including Ethereum, the token cannot change its perception of the community because it will not associate itself with ecosystem custody.
Join to get the other side of encryption
Upgrade your inbox and send our DailyCoin Editor’s Picks directly to your inbox once a week.
You can unsubscribe at any time with just 1 click.