The Ethereum price has recorded a 65% contraction against Bitcoin since the final implementation of Proof-of-Stake in 2022, according to data from Ultrasound.money. This technical behavior, coupled with an annual inflation rate of 0.23%, seriously questions the viability of the ultrasound money concept within the context of the current global market cycle.
The transition to a more energy-efficient consensus model has failed to consolidate the deflation originally expected by high-profile institutional investors. Although the EIP-1559 burning mechanism sought to reduce the circulating supply constantly, the low base activity has reversed this monetary trend. The market is currently punishing the lack of real scarcity in the asset.
Migration to secondary layers weakens the programmed scarcity narrative
The massive boom in scalability solutions has caused a significant drain of fees toward high-performance second-layer networks. Given that rollups currently process more than 920 operations per second, the main network has lost its burning capacity. Average transaction fees have fallen drastically to stay near $0.21, significantly reducing the amount of ETH removed from circulation.
This scenario poses a structural dilemma for the digital ecosystem, as operational efficiency competes directly with the economic appreciation of the native asset. While the use of the blockchain scales exponentially, the value captured by the token is progressively diluted. The lack of a solid deflationary catalyst deeply affects the confidence of long-term holders in the current market.
The disparity between the growth of Bitcoin and Ethereum is clearly manifested in the institutional capital flows entering through ETF products. While Bitcoin spot funds accumulate nearly 91.9 billion dollars, Ether barely attracts a fraction of that interest. The predictability of Bitcoin’s limited supply remains its main competitive advantage over Ethereum’s more flexible and changing monetary policy.
Will the Ethereum network be able to regain its deflationary status soon?
Technical analysis suggests that the recovery of the ETH/BTC pair will depend on a substantial increase in on-chain economic activity on the main network. However, with the fragmentation of liquidity among various layers, the Ethereum price faces strong psychological resistance. The absence of a clear scarcity narrative makes it difficult to achieve a sustained breakout above new historical highs.
Added to this are the periodic sales carried out by the Ethereum Foundation, which generates additional downward pressure on general market sentiment. While these operations finance the necessary technical development, the perception of constant distribution by the founders limits the potential for an upward breakout. Investors are closely monitoring the issuance policy and the Foundation’s movements.
Looking ahead, the market will be attentive to the possible implementation of technical improvements that incentivize fee burning in the upper execution layers. Ethereum’s ability to reinvent its financial value proposition will be decisive in attracting institutional capital once again. Monitoring net issuance levels will be the key indicator for the coming trading months.
