Bitcoin was considered “digital gold”. But Ethereum surpassed Bitcoin in a key … (+)
President Trump announcement Yesterday, the Crypto Strategic Reserve, which includes XRP, Sol and Ada, Bitcoin (BTC) and Ethereum (ETH), adding: “I love Bitcoin and Ethereum!”
For years, Bitcoin has been greeted As “digital gold” – a rare and predictable value store. But in recent years, Ethereum has discreetly surpassed Bitcoin in a key aspect: the expansion of the offer. From The merger In September 2022, Ethereum’s supply increased at a slower rate than that of Bitcoin, which questions the long -standing hypothesis that Bitcoin is the best form of healthy money.
Unlike 21 million BTCOIN BTC, Ethereum is designed to be adaptive, allowing its supply to develop or contract according to network activity. So, Ethereum is the bitcoin to his own game? Let’s dive!
Is Ethereum healthier?
The Bitcoin fixed supply ceiling of 21 million BTC was its decisive characteristic. Unlike fiduciary currencies such as the US dollar (USD) and the Euro (EUR), which can theoretically be extended without limit, Bitcoin follows a cycle by half strict, reducing a new program by half every four years. This process ensures that the rate of new bitcoins entering traffic slows over time, strengthening its rarity.
After its last reduction by half in April 2024, the annual growth of the Bitcoin offer dropped to 0.83%. This controlled emission has strengthened its reputation as a strong value reserve, similar to gold.
Ethereum, however, follows a different approach to supply management. Unlike Bitcoin, which has a fixed limit, Ethereum power supply can be adjusted over time. Since the merger, when Ethereum has moved to a system of proof of implementation (POS), it has become more and more deflationary. This change has reduced energy consumption by around 99.95% and considerably reduced the creation of a new ETH, which makes it rarer over time.
In addition, an upgrade introduced on August 5, 2021 changed the way Ethereum calculates and treats transaction costs, introducing a burning mechanism. Consequently, Ethereum’s supply has sometimes been narrowed rather than enlarged. As the figure below shows, since the merger, the total offer of Ethereum has increased at a much slower rate than that of Bitcoin.
While Bitcoin provides absolute rarity, Ethereum is more adaptive and flexible, adapting to market conditions. If healthy money concerns the growth of the supply, then Ethereum has unexpected Bitcoin unexpectedly in this regard in recent years.
Fiat Money, Bitcoin and Ethereum?
Bitcoin and Ethereum follow different monetary policies in the way their supply develops over time. But how do they compare themselves to traditional fiduciary currencies such as the US dollar (USD) and the Euro (EUR)?
As the figure below shows, since 2020, the monetary mass of the US dollar (M2) has increased by 41% – out of four times the growth of Bitcoin and Ethereum – while the money mass of the Euro (M2) has increased their rate to more than twice. This highlights the contrast between Fiat Money’s flexibility, the bitcoin strict supply limits and the adaptable approach of Ethereum, which is between the two.
Bitcoin and fiduciary currencies are at the opposite ends of the expansion spectrum of the food. Bitcoin’s fixed supply model guarantees rarity, while trustee funds can develop or contract according to economic policy. However, excessive expansion often leads to inflation, as seen with the USD and EUR since 2020. Ethereum has adopted an intermediate approach. It maintains rarity such as Bitcoin but has a supply mechanism which can develop or contract depending on the activity of the network.
A historical lesson on gold
The story offers one of the strongest arguments against a fixed monetary system.
Before 1933, the US dollar was supported by gold, limiting the money supply to gold reserves. Although this guaranteed stability, he also prevented expansion during economic slowdowns.
When the stock market crashed in 1929, followed by bank failures in 1930 and 1931, severe deflation was installed. Cut on the gold stallion, the United States and other nations could not extend its money supply to stimulate recovery.
Great Britain abandoned the gold stallion in 1931, with others who follow. The United States held until 1933, when President Franklin D. Roosevelt (FDR) devalued the dollar and reduced its golden support, effectively widening the money supply. Economists like Milton Friedman and Ben Bernanke then credited this decision to help end the Great Depression.
Gold can be a good reserve of value, but can be problematic as a means of exchange, in particular to break the deflationary spirals and support economic growth. Meanwhile, Fiat Money expands without limit, risking inflation. The ideal monetary system can be somewhere between the two.
Show must go on
Trump approval by Bitcoin and Ethereum in its strategic cryptography reserve announcement will undoubtedly trigger an additional debate on which is the best form of cryptocurrency.
While Bitcoin remains the original “Digital Ord”, Ethereum is becoming a strong competitor – not only for its rarity, but for its flexibility and its economic adaptability.
