 ▲ Ethereum (ETH) |
Ethereum (ETH) has plunged 60% against Bitcoin since transitioning to Proof of Stake (PoS), fueling growing skepticism over the effectiveness of the once-celebrated Ultrasound Money strategy.
According to cryptocurrency media outlet Cointelegraph on March 10 (local time), Ethereum’s price relative to Bitcoin (BTC) has fallen 60% since The Merge in September 2022, when the network shifted from Proof of Work (PoW) to Proof of Stake. This performance is being interpreted as a significant indicator that the Ultrasound Money narrative—aimed at increasing asset value by reducing supply—has moved in a direction contrary to market expectations. In the past, Ethereum supporters were confident that decreasing supply would make Ethereum a superior asset to Bitcoin, but actual capital flows have increasingly concentrated toward Bitcoin.
Ethereum’s supply mechanism relies on fee burning tied to network activity, but recent technical changes have had the side effect of sharply reducing the amount burned. In particular, following the Dencun upgrade, transaction fees on Layer 2 networks dropped substantially, leading to a decline in the amount of Ethereum burned on the mainnet. As a result, Ethereum’s total supply has returned to an upward trend. This supply structure, which has lost its ability to curb inflation, contrasts with Bitcoin’s strong price defense based on scarcity, contributing to investor disengagement.
Justin Drake, a researcher at the Ethereum Foundation, acknowledged amid the recent debate that Ethereum would need to further reduce issuance or increase burn rates to reclaim its Ultrasound Money status. While Drake pointed to Bitcoin’s security cost and supply cap limitations to argue for Ethereum’s long-term advantage, the market continues to question whether the shift to Proof of Stake was a misstep in terms of price performance. As Bitcoin has established itself as an institutional safe-haven asset following the approval of spot ETFs, Ethereum is seen as grappling with both technical complexity and oversupply.
Virtual asset analysts note that the so-called Flippening scenario, in which Ethereum’s market capitalization surpasses Bitcoin’s, now appears closer to fantasy than reality. Over the past two years, Bitcoin has widened its return gap over Ethereum to more than 160%, while Ethereum also faces market share threats from next-generation blockchains such as Solana. Critics argue that the transition to Proof of Stake, aimed at improving technical sophistication, has instead diminished Ethereum’s appeal as an investment asset.
The Ethereum ecosystem now stands at a crossroads, needing to move beyond the Ultrasound Money framework and find new growth drivers that can generate tangible network utility and attract institutional capital. If Ethereum, already lagging in its value competition with Bitcoin, fails to translate the efficiency of its Proof of Stake system into price gains, its market dominance could weaken further. Investors are closely watching changes in Ethereum’s supply policy and whether it can establish a bottom in its exchange ratio against Bitcoin as they consider portfolio rebalancing.
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