The crypto community’s long-held belief is that Bitcoin is the most ideal crypto asset that might serve as a suitable hedge against the world’s burgeoning inflation.
Now, if a new study conducted by the University of Sydney and Macquarie University is any indication, the flagship digital asset may soon lose that distinction.
Based on universities’ new study, Ethereum — the second-largest cryptocurrency by market capitalization — has the potential to supplant Bitcoin as a more effective inflation hedge.
Most preferred
The researchers acknowledged that as global usage of digital assets increases, investors now perceive cryptocurrencies, particularly Bitcoin, as a superior inflation hedge than gold.
The researchers pointed out that Ethereum may eventually surpass Bitcoin as the preferred inflation hedge because of the volume of innovations occurring inside its ecosystem.
The experts said that Ether’s upgrade to ETH 2.0 in 2022 may demonstrate that cryptocurrencies can potentially be deflationary in nature.
“With up to half of the networks’ blocks burning more Ethereum than is made, the idea that Bitcoin provides the best inflationary hedge among the cryptocurrencies is increasingly coming under threat,” the researchers said.
Store of value
This type of protocol enhancement could set the stage for more cryptocurrencies to strengthen their anti-inflationary properties, making them more valuable as “a store of value than Bitcoin,” the paper’s abstract states in part.
While global crypto adoption is still in its infancy, available data indicates that more institutional and retail investors have begun to see the huge potential that investing in crypto offers.
In recent studies, it was discovered that while the US Dollar’s value has struggled with inflation over the last 10 years, Bitcoin has had an impressive 99.996% deflation during the same time period.
Meanwhile, there has been an increase in interest in Bitcoin’s hard cap of 21 million coins and its usefulness as an inflation hedge as a result of excessive money printing during the pandemic and inflation rising throughout to 6.2% in the US last month. However, the researchers said investors may choose to explore Ether for this reason as well.
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