Up to this point in time, the investing market has settled on BTC being the optimal store of value in digital assets. With a 21 million hard cap and little to no chance of cap that being changed by the Bitcoin core devs for cultural reasons, there are definitely strong arguments for why BTC is the best store of value in crypto. Furthermore, Bitcoin has an incredibly low inflation rate of 1.76% per year, and the upcoming halvings, which occur approximately every 4 years, will reduce the inflation even further.
ETH > BTC
Yet there are many arguments for why ETH will actually replace BTC as the superior digital store of value in coming years. EIP-1559 already leads to ETH being burnt, and with the merge, there will be even less net inflationary ETH. While the current inflationary rate of Ethereum is currently approximately 5%, post-merge, the inflationary rate will drop to around 1% because there will no longer be new ETH coming to market in block rewards for miners.
Furthermore, because of EIP-1559, that small 1% inflationary rate could very well quickly turn deflationary. Crypto service provider Lucky Hash projects a net 1% deflationary rate post merge. Other analysts have confirmed the general direction of Lucky Hash's projection, as their models predict that EIP-1559 willy apply approximately a 3% deflationary pressure on Ethereum, which would put ETH deflation at 2% assuming the inflationary rate drops to 1% without taking into account EIP-1559.
With multiple analysts predicting net deflation on Ethereum, the entire narrative surrounding ETH is likely to change post-merge. If ETH has a deflation rate between 1 - 3%, from a stock-flow perspective it will be superior to BTC in terms of being a better store of value.
ETH strategically positioning itself to become the global reserve currency
I absolutely believe the Core Developers, and especially Vitalik Buterin, knew exactly what they were doing when they decided to implement EIP-1559 and opted to move fully to proof of stake. These moves are indicative that Ethereum is indeed targeting BTC's narrative that it is the optimal store of value.
Furthermore, the gigabrain Ethereum core devs are perfectly positioning ETH as the currency that will emerge post fiat currency collapse, which we have just started to embark upon globally. With debt issuance raging out of control for nearly all countries globally, in addition to rising inflation, supply chain disruption, war, and surging commodity prices, the world will need to embrace a store of value currency in order to restore faith in the collapsing financial system. Traditionally, those currencies have been gold or silver, but I doubt they will be hard metals in the future.
While BTC is traditionally seen as the top contender in crypto to become the next global reserve currency, with the upcoming merge, I believe ETH will be far better positioned.
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