Ethereum's rise challenges Bitcoin's status as a store of value

Ethereum is gradually becoming a strong competitor to Bitcoin in the field of value storage, a trend recognized by analysts. The main factor driving this change is the rise of digital asset treasuries (DATs), with more and more global companies choosing Ethereum and Bitcoin as their digital asset reserves.

In the early days, Bitcoin became the preferred choice for DATs due to its limited supply and recognized stability. However, recent developments have sparked greater interest in Ethereum in the market. Changes in the regulatory environment in the United States have highlighted the importance of stablecoins and tokenization, which happen to be the core advantages of the Ethereum ecosystem.

This has allowed the application of Ether to go beyond its original design intent. Several large brokerages and exchanges have launched tokenized stocks on the Ethereum blockchain. Furthermore, the increasing flexibility of Ethereum is seen as a significant advantage over Bitcoin.

Analysts point out that Ethereum offers more possibilities for complex financial strategies, allowing institutions to accumulate ETH more efficiently than accumulating BTC. Through Ethereum's staking feature, the treasury can earn additional ETH by participating in the network, which is a source of returns that is difficult to obtain from other cryptocurrencies.

The transition of Ethereum from Proof of Work (PoW) to Proof of Stake (PoS) has had a significant impact on its inflation rate. Data shows that this shift has drastically reduced the supply growth of ETH: from approximately 120.6 million ETH in October 2022 to 120.1 million in April 2024, resulting in a negative inflation rate of -0.25%. In contrast, the supply of other major cryptocurrencies grew by 1.1% during the same period, making Ethereum's inflation policy more attractive to ETH holders.

The inflation rate of certain cryptocurrencies drops by 50% after each halving, making their inflation rates more predictable. However, the problem is that this top cryptocurrency relies on inflationary issuance to incentivize miners in the long term. Last year, miners earned huge revenues from inflation rewards, totaling over $14 billion.

Therefore, as the inflation rate continues to decline during subsequent halvings, its security model will face increasing pressure, potentially needing to rely on transaction fees or price increases to sustain itself. In the absence of these supports, the security of the blockchain network may be at risk, which could in turn force a significant transformation of the economic structure.

On the other hand, Ethereum's PoS model gives token holders more control over network governance, ensuring that decisions about network upgrades and economic policies more directly align with their interests. This contrasts with the miner-centric governance model, where the economic incentives of miners often influence decision-making.

Therefore, analysts believe that as Ethereum continues to develop with a more flexible governance structure, it may become a superior long-term store of value compared to other cryptocurrencies.