Ethereum’s “Ultrasound Money” Pivot Fails to Close the Gap With Bitcoin
March 10 2026
Key takeaways
- Since the 2022 transition to proof‑of‑stake, Ether has lost roughly 65 % of its value relative to Bitcoin.
- The expected deflationary pressure from the EIP‑1559 burn mechanism has weakened; ETH’s net supply growth is now about +0.23 % per year, compared with Bitcoin’s ≈ 0.85 % inflation.
- Declining transaction fees (average $0.21 in March, down 54 % YoY) and the migration of activity to layer‑2 rollups have reduced the amount of ETH burned on‑chain.
- Investor confidence continues to favor Bitcoin’s immutable 21 million‑coin cap, evident in a $91.9 bn AUM for spot Bitcoin ETFs versus $12.1 bn for Ethereum ETFs in the United States.
- The “ultrasound money” narrative no longer aligns with on‑chain realities, raising questions about Ethereum’s long‑term scarcity story.
1. Background – The promise of “ultrasound money”
When Ethereum introduced EIP‑1559 in August 2021, a portion of each transaction fee began to be destroyed (“burned”). Proponents argued that, combined with the steep reduction in block rewards after the 2022 Merge, the protocol would become deflationary, turning Ether into a scarcer asset than Bitcoin. Early data from the analytics platform Ultrasound.MONEY indicated an average annual supply contraction of ‑0.19 % after the burn went live.
2. Supply dynamics after the Merge
The reality since the shift to proof‑of‑stake diverges sharply from the initial optimism:
| Metric | Post‑Merge (2022‑2026) |
|---|---|
| Net supply change | +0.23 % per year |
| Bitcoin’s inflation | ≈ 0.85 % per year |
| Average transaction fee (Mar 2026) | $0.21 (‑54 % YoY) |
The net positive supply growth reflects a situation where issuance to validators outpaces the amount burned. The burn mechanism is fee‑driven, so lower fees directly translate to fewer ETH removed from circulation.
3. From L1 to L2 – Where the activity lives
A growing share of Ethereum’s usage has migrated to layer‑2 (L2) solutions. Data from L2Beat shows that on March 7 the combined rollup ecosystem processed ≈ 926 user operations per second (UOPS), compared with a modest ≈ 22 UOPS on the Ethereum base layer. While L2s improve throughput and reduce costs, they also decouple most transaction fees from the L1 burn schedule, further eroding the deflationary feedback loop.
4. Price performance vs. Bitcoin
The relative underperformance of ETH is stark:
- ETH/BTC has slid about 65 % since the Merge, as illustrated by recent three‑day price charts.
- In dollar terms, Ether’s price has barely nudged past its 2021 peak of $4,800, whereas Bitcoin’s price more than doubled from its 2021 high to a new record in 2025.
- Spot Bitcoin ETFs in the U.S. command ~ 7.5× the assets of their Ethereum counterparts, underscoring institutional confidence in Bitcoin’s fixed‑supply model.
5. Investor sentiment and narrative fatigue
Analyst commentary highlights a persistent preference for Bitcoin’s predictable monetary policy. The 21 million‑coin cap, coupled with a transparent issuance schedule, is perceived as a “set‑in‑stone” safeguard against inflationary surprises. By contrast, Ethereum’s supply outlook has become more ambiguous, prompting critics to argue that the “ultrasound money” branding was abandoned once it proved inconvenient.
Additional market pressure stems from periodic high‑profile ETH sales by co‑founder Vitalik Buterin and the Ethereum Foundation, which have been flagged by research outfits such as Culper Research. These moves fuel a narrative that insiders may be capitalizing on short‑term price spikes rather than reinforcing a long‑term scarcity thesis.
6. Outlook
The convergence of lower on‑chain fees, rising L2 activity, and modest net supply growth suggests that relying on a deflationary supply alone will not rejuvenate Ether’s price relative to Bitcoin. For the “ultrasound money” narrative to regain traction, Ethereum would need either:
- Higher on‑chain activity that restores sufficient fee burning to offset issuance, or
- Policy adjustments that tighten supply—for example, raising the base fee or altering validator rewards.
Absent such developments, Ethereum is likely to remain price‑wise subordinate to Bitcoin, while continuing to serve as a platform for decentralized applications rather than a pure store of value.
The information presented is for editorial purposes only and does not constitute investment advice. Readers should conduct their own due diligence before making any financial decisions.
Source: https://cointelegraph.com/news/was-ethereum-ultrasound-money-mistake-eth-btc-down-60-since-pos?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
