Ethereum's Ultrasound Money Thesis Under Threat as Supply Rises

Ethereum's ultrasound money thesis has been put to the test as its circulating supply has been rising, contrary to expectations. Since April 2024, ETH's supply has increased from 120.064 million ETH to 121.943 million ETH, representing a 0.67% annual inflation rate, which is higher than the figures cited by several ETH treasuries.

This increase in supply has led to ETH underperforming compared to other major cryptocurrencies like Bitcoin (BTC), BNB, and XRP. Between April 2024 and now, BTC returned -7%, while XRP surged 65% and BNB gained 5%. In contrast, ETH suffered a -46% decline.

The ultrasound money thesis posits that if Bitcoin is 'sound money' due to its limited supply cap, then Ethereum's decreasing supply makes it an even better store of value. However, this argument has been weakened by the rising supply.