The Ethereum Ratio Crosses 77

The Ethereum Ratio Crosses 77

Ethereum is back to pre-FTX levels in its value against bitcoin, with the ratio rising for much of this month from 0.072 BTC at the beginning of the year to 0.077.

That 0.005 bitcoin difference is worth $87 per eth, with the currency currently trading at $1,330, up from about $1,200 as the year began.

There’s a re-pricing going on now that markets have calmed down somewhat after, for ethereum, a six months long sideways with its current price being roughly the same as back in June.

The FTX debacle therefore changed little, partly perhaps because they had little eth, but it did make bitcoin hit a new low and they had little BTC too.

The sustainability in eth therefore is probably more due to the probable reduction in demand being cancelled out to some extent by the reduction in supply.

Only 3,700 new eth have been created since September 15th. Without the upgrade to full Proof of Stake, it would have been 1.4 million eth.

In addition, some 2.8 million eth have been burned in the past circa two years, with the burning so running at about 1.4 million eth a year and in this depth of bear, at about 2,000 a day.

There are now close to 17 million eth locked in the blockchain staking. That amounts to about 14% of the supply even though it currently has significant opportunity costs as you can’t get them out.

Until the unlock upgrade, which they are somewhat dumbly calling Shanghai. The unlock upgrade should go out maybe this quarter or next, at which point the only opportunity cost would be hot wallet in staking as it would be online, or cold storage.

That is to say that if the assets are on MetaMask or on exchanges, there would be no reason whatever to not stake them as you can at that point unstake whenever you want.

That also means these would no longer quite be locked, and therefore they might no longer quite have an effect on the market, but inertia coupled with rewards may well make some people that would have sold or gone to other cryptos, instead just hodl.

The ethereum asset therefore is changing and fundamentally. This is now a fixed supply coin at worst, at the depth of bear, and it provides a 5% yearly reward for just hodling.

That 5% is in eth itself, which can be good or bad depending on market conditions, but no stock – except perhaps the rarest of them all that no one knows – both provides a 5% dividend and has potential to maybe even 10x.

In regards to the latter, we know that eth can at the very least 3x or 4x because it was worth circa 4x more only a year ago, and so it already has that market potential.

All of which makes eth attractive without even considering growth, but we do need to add growth too.

Specifically Solidity. No one appears to know about it. Even coders, though down the street, in the wild, and even in US.

That will naturally change gradually because it is an open source web host, an actual public cloud where the code is public and the servers are run by the public too.

Estimating growth however is almost impossible because it’s a global arena and information tends to travel both at a squared or even cubed speed, and very locally.

In addition Solidity is a niche of a niche, both in coding and in crypto, but it pays more than any other programming language.

If we had to guess, there probably will be at least one random person in the wild that has heard of Solidity in four years, up from currently zero.

That translates to at least 2x growth, giving eth the potential of 10x, though from $1,000 currently so $10,000 – $15,000, maybe even $20,000 if we add the supply change.

That both sounds a lot, a trillion to $2 trillion dollar market, but only 3x from the top. Yet here at the bottom, it’s not easy to see what other asset might have similar returns.

And all that from ‘mechanics,’ arguably of course. However what is not arguable is that ethereum has changed.

The Rise of ETH

ETH/BTC price weekly, Jan 2023
ETH/BTC price weekly, Jan 2023

The above is one of the most interesting chart we have seen for some time because ethereum’s value against bitcoin has remained somewhat static since May 2021.

There are two interpretations we can give for that rise in May. It was bull, so eth had to keep up and rose, but a more explanatory explanation may well be that a lot of the bull was actually due to eth.

The ratio rose because demand for ethereum specifically rose due to defi and NFTs as well as other Solidity related developments and innovations.

If the gains during the bull therefore were ‘earned,’ and thus ‘objective’ in as far as eth deserved it, the supply change in eth should add more to those gains because bitcoin has added 105,000 BTC since September, or close to $2 billion needing new demand.

That’s a big difference in just over a quarter, and therefore the ratio may move higher.

It’s at significant resistance at these levels, if not at the biggest resistance, because it was significant support when it was coming down in 2017 from double the current rate at 0.16 BTC per eth in June of that year.

That’s a flippening sum, with the current sentiment being no where near to support such flippening, but if the ratio keeps climbing, sentiment might change.

In addition, the flippening does now for the first time since 2017 have some basis for speculating because the only difference bitcoin now has is its Proof of Work, which does have its advantages, but maybe not worth 2x the eth market cap.

This 2023 therefore may have new dynamics compared to 2019, and that may make the year a lot more exciting because there’s a big unknown in just what exactly does an eth fixed supply mean to the market.

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