Jamie Coutts, an analyst at Bloomberg, compared cryptocurrencies to publicly traded companies and ultimately pointed out that several Ethereum competitors will die because they fail to generate profits.
Other cryptocurrencies analyzed by Coutts were projects referred to as “second tier”, that is, those that operate on top of Ethereum. While the situation for these cryptocurrencies is not as bad as the others, they are also negative.
While Bitcoin has few competitors, acting as a currency and store of value, Ethereum has several rivals in the “smart blockchain” sector, including Binance Coin (BNB), Cardano (ADA), Solana (SOL), Tron (TRX), Avalanche ( AVAX), and many others.
Ethereum competitors are at their wits end, Bloomberg analyst warns
Since cryptocurrencies do not generate dividends, it is difficult to find their ideal price, just like stocks. Still, Jamie Coutts worked out a short thesis to analyze the opportunities (or lack thereof) in this sector.
“The landscape of alternative layer-first (L1) blockchains reminds me of zombie companies (EBITnoted Coutts. ‘I don’t see how [essas] cryptocurrencies could prevent widespread death in the not-too-distant future.”
“Insufficient demand (rates) + high inflation = negative profitability.”
Coutts continues his explanation, revealing that 23% of the companies in the Russell 3000 – an index similar to the S&P 500, but with more companies – are zombies, meaning they do not generate profits.
“People will pay for potential growth, and for some that will ultimately result in profitability”continued Coutts.
“The problem is the new tariff regime – there will inevitably be wear and tear. The same goes for alternative tier 1 blockchains, some will survive and thrive, but many will have to change course.”
While it’s hard to compare cryptocurrencies to company stocks, Coutts means Ethereum has found strong monetary policy while maintaining its security. The competitors are still influenced by their own inflation.
According to data from Ultra Sound Money, Ethereum has seen a reduction of 302,500 ETH (R$2.75 billion) since The Merge. The entire account burned over 1 million ETH and generated only 666,000 new ETH.
Therefore, Ethereum now has a negative inflation rate of 0.28% per annum, an advance compared to Proof-of-Work, whose estimates indicate inflation would be 3.17% per annum.
Finally, other Ethereum competitors have yet to reach this level and, according to Coutts, this could mean their days are numbered.
Anyway, it’s worth noting that ETH had big price jumps even when it was quite inflationary. In addition, such projects can make changes to their policies at any time, which can change the analysis scenario again.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.