Ether (ETH) has dropped roughly 65% against Bitcoin (BTC) since Ethereumâs 2022 shift to Proof-of-Stake (PoS), casting doubt on the networkâs âultrasound moneyâ thesis.
Key takeaways:
Etherâs ultrasound money narrative disappoints
The idea behind âultrasound moneyâ was that Ether would become even scarcer than Bitcoin.
Supporters argued that Ethereumâs 2021 EIP-1559 upgrade, which began burning a portion of transaction fees, combined with the sharp decline in new ETH issuance following the 2022 Merge, would make Ether deflationary over time.
ETHâs new annual supply rate has averaged about -0.19% after the burn mechanism went live in 2021, according to Ultrasound.MONEY.
Since Ethereumâs shift to PoS in 2022, however, ETH supply has grown at an annualized rate of about 0.23%, though lower than Bitcoinâs current annual inflation rate of 0.85%.
However, Ethereumâs supply growth since the Merge undermines the promises of deflation. ETH turns deflationary only when mainnet activity is sufficient to burn more coins than the network issues to validators.
That condition has weakened. Ethereumâs average transaction fee is about $0.21 in March, down roughly 54% from a year earlier, according to YCharts.
Lower fees mean the Ethereum network burns less ETH.
Moreover, most of Ethereum’s activity has moved to cheaper layer-2 networks. L2beat shows rollups handling 926 user operations per second (UOPS) on March 7, compared to just 22.36 on Ethereumâs mainnet.
While the shift helps the network scale, it weakens the burn-heavy conditions required to make Ethereum deflationary.
Why is ETH underperforming BTC?
Ether price has underperformed BTC partly because investors trust Bitcoinâs fixed supply, according to analyst Handre.
Bitcoinâs strictly enforced 21 million coin cap and fixed supply schedule appeal to investors as it makes BTC more predictable in the longer term. This resistance to change makes Bitcoin stand out from the monetary policies of most altcoins.
âEvery scaling debate, every upgrade proposal, every attempt to change Bitcoin’s monetary policy has failed because the economic majority understands what they’re protecting,â Handre said.
Related: Etherâs path to $2.5K may be trickier than expected: Hereâs why
Ethereum, by contrast, is not as predictable when it comes to monetary policy, particularly now that ETH supply is growing modestly again.
Handre added:
âEvery altcoin promises scarcity but delivers inflation by design. Ethereum abandoned its âultrasound moneyâ narrative the moment it became inconvenient.â
The investorsâ preference is visible in the United Statesâ ETF market. As of March, spot Bitcoin ETFs held more than $91.9 billion in assets under management, compared with about $12.1 billion for spot Ethereum ETFs.
Ether never delivered a convincing breakout in dollar terms either.
Between 2021 and 2026, ETH only marginally exceeded its previous all-time high near $4,800 before losing momentum, unlike Bitcoin, whose price doubled from the 2021 peak to the 2025 record high.
The underwhelming performance by ETH over the past five years suggests that reduced issuance alone was not enough to create sustained new demand.
Sentiment has also been pressured by periodic ETH sales linked to Vitalik Buterin and the Ethereum Foundation.
Public criticism from Culper Research, which said it was short Ether due to Buterinâs selling, has amplified the view among some traders that Ethereumâs insiders are distributing into strength rather than reinforcing long-term conviction.
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