After Ethereum switched to Proof-of-Stake (PoS) in 2022, Ether (ETH) has fallen about 65% against Bitcoin (BTC), casting doubt on the network’s “ultrasound money” thesis.
Basic considerations:
The story of ultrasound money is disappointing Ether
The idea behind the “ultrasound money” was that Ether would become even rarer than Bitcoin.
Proponents have argued that Ethereum’s 2021 EIP-1559 update, which began burning a portion of transaction fees, combined with a sharp drop in new ETH issuance after the 2022 Merge, will deflate Ether over time.
According to Ultrasound.MONEY, the new annual supply rate of ETH after the activation of the burning mechanism in 2021 averaged about -0.19%.
But since Ethereum’s transition to PoS in 2022, the supply of ETH has grown at an annual rate of about 0.23%, though lower than Bitcoin’s current inflation rate of 0.85%.
However, Ethereum’s post-merger supply surge is deflating promises of deflation. ETH will only deflate when there is enough network activity to burn more coins from network issues to validators.
This situation has slowed down. According to YCharts, the average Ethereum transaction fee in March was around $0.21, down about 54% from a year earlier.
Lower fees mean the Ethereum network burns less ETH.
Moreover, the majority of Ethereum activity has moved to cheaper layer-2 networks. L2beat shows totals of 926 user operations per second (UOPS) on March 7, compared to just 22.36 on the Ethereum mainnet.
While the transition helps scale the network, it weakens the critical burn conditions necessary for Ethereum to deflate.
Why is ETH underperforming BTC?
According to analyst Hendre, the price of Ether has underperformed BTC in part because investors believe in a constant supply of Bitcoin.
Bitcoin’s 21 million coin cap and stable supply schedule are attractive to investors because it makes BTC more predictable in the long run. This resistance to change distinguishes Bitcoin from the monetary policy of most altcoins.
“Every scale argument, every improvement proposal, every attempt to change Bitcoin’s monetary policy has failed because the economic majority understands what they are protecting,” Hendre said.
related to: Ether’s Road to $2.5K May Be Harder Than Expected: Here’s Why
In contrast, Ethereum is not as predictable when it comes to monetary policy, especially now that the supply of ETH is growing steadily again.
Handre added:
“Every altcoin promises scarcity, but delivers inflation by design. Ethereum abandoned its ‘ultrasound money’ narrative at an inopportune moment.”
Investor preference is evident in the United States ETF market. As of March, spot Bitcoin ETFs had more than $91.9 billion in assets under management, compared to about $12.1 billion for spot Ethereum ETFs.
Ether has never made a convincing defeat against the US dollar.
Between 2021 and 2026, ETH only rose from its previous record high near $4,800, unlike Bitcoin, whose price doubled from its 2021 peak to its 2025 record high.
The incredible performance by ETH over the past five years shows that emission reductions alone have not been enough to create sustainable new demand.
Sentiment was also weighed down by the cyclical selling of ETH linked to Vitalik Buterin and the Ethereum Foundation.
Public criticism of Culper Research, which said it was shorting Buterin Ether, has fueled the view of some traders that Ethereum insiders are splitting rather than reinforcing long-term belief in strength.
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