Ethereum (CRYPTO: ETH), the second-largest cryptocurrency by market capitalization, has charted a diametrically opposite trajectory when compared to its older sibling, Bitcoin (CRYPTO: BTC), over the past year.
Consider this. Bitcoin has jumped 32% in a year, reaching an all-time high of $109,000. Its share in the overall cryptocurrency market has expanded from 52% to 60%.
Ethereum, on the other hand, contracted 39% during the same time, reducing its market share from 16% to 8%.
The widening gap has sparked discussions about Ethereum’s role in the cryptocurrency hierarchy and its future course Benzinga spoke to a few analysts to understand the factors contributing to the ecosystem’s ongoing downturn.
The Inflationary Problem
Jeffrey Hu, Head of Investment Research at digital asset manager HashKey Capital, believed the fault lies in Ethereum’s economic model.
“The activation of EIP-1559 allows more Ether to be burned for deflation when Ether activity is high on Ethereum; however, in order to further support on-chain applications, Ethereum must scale,” Hu stated.
The Ethereum London Hard fork, dubbed EIP-1559, introduced a token burn mechanism for the network. Under this mechanism, the base fee, i.e., the minimum fee per transaction, is removed …Full story available on Benzinga.com
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