The Ethereum blockchain brought forward a much-needed feature to enhance the efficiency of almost all businesses. Smart-contracts have the ability to improve the finance industry, government and public sectors, law, international trade and enterprise, real estate and even media and entertainment.
Additionally, Ethereum has the first movers advantage and is close to becoming a household name which puts it in the front of the line for global adoption. To this day multiple globally recognizable companies have become members of the “Enterprise Ethereum Alliance” (EEA), including Intel, Microsoft, J.P Morgan and BNY Mellon.
This alone may save it from any disadvantages the switch to ETH2.0 may bring.
Price dynamics
Ether, the native asset used for transacting on the Ethereum blockchain, is subject to the same supply and demand dynamics of any asset out there. This year alone we saw an immense increase in demand.
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Source: Santiment[/caption]
While the supply was originally open-ended (unlimited), Vitalik later proposed a hard-cap at 120M ETHs. The latter decision was made for multiple reasons, one of which is to maintain Ether mining, and later staking, a lucrative endeavour for transactions processors.
This signifies that with a static supply and an increasing demand, to which will be added hoarding (staking), Ether’s price should theoretically increase. Contrary to popular belief, this is isn’t the case with the majority of crypto-assets.
Global recession effect
In this global recession that has just started, businesses are taking the largest hit as human life, and hence spending is practically halted. As Ethereum is business-centric and relies on businesses’ involvement for growth, it is not in the same prime place for price appreciation like Bitcoin the moment.
Of course, we must keep in mind that there remains a high correlation of price movements amongst the cryptocurrencies and until we see a real decoupling, opposite movements cannot be assumed. However, sooner or later, with the maturity of the space, it’ll inevitably take place.
Coming out of the recession will likely be very bullish for Ether in particular as more innovative businesses adopt this new technology. Uber, Airbnb and many other massively successful businesses were founded during the 2008 recession.
Decentralised Finance (DeFi)
Ethereum, being such a versatile blockchain network, has one application in particular that can help it thrive even in a recession; and that is DeFi.
High street banks are currently being stress-tested to the absolute maximum and with the recent drop in reserve requirement (0%), their failure is highly probable which is a catastrophic effect for depositors.
Holding one’s wealth on a blockchain has become more secure these days, additionally, many assets are becoming available to hold including Gold (PAX Gold token) and stablecoins pegged to fiat currencies to avoid cryptocurrency volatility. These also come with better services such as loans with lower fees and earning high interest (8.6% APY for stablecoins on BlockFi). These rates, likely not decrease over time, are much more attractive than any interest rate on savings accounts offered by any bank.
DeFi represents another reason as to why the public will shift from centralised institutions to distributed-ledger technology. The prime candidate for this application is again the Ethereum blockchain.
Final words
While Ether may not be in the same attractive boat as Bitcoin is with its safe-haven status, it will likely perform better than equities markets due to the necessity for advancement in many fields right away. The latter will likely cause Ether to appreciate in price once the stock market bleeding has ended as innovation enters the scene similar to what we’ve seen in 2008.
The crypto markets remain entangled to Bitcoin’s performance and may still follow suit for some time, however, a decoupling is imminent as each asset serves a different purpose and has a different value proposition.
Where Ether surely becomes more attractive than Bitcoin is near the end of the recession once the recovery phase is finishing up and ready for another expansive period.
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