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Ethereum (ETH) could be starting to outperform Bitcoin (BTC) again once it will make its planned upgrade to a proof-of-stake system later this year. According to macro expert, Raoul Pal, following the network overhaul, selling pressure will drop significantly as investors will take their ETH holdings off the market and stake them for yield.
In addition, the absence of miners is also expected to be bullish for the second largest cryptocurrency, since operational costs do not have to be covered, as is the case in proof-of-work cryptocurrencies.
In a new update on his Real Vision channel, Pal said:
“What’s really interesting here is that this is a supply reduction of really monumental proportions that’s about to take place.
There are no miners anymore. So, therefore, all the activity of miners of selling the tokens that they’ve earned, they probably sell about 80% of the tokens that they get just to fund their own activities. That’s about a billion or 2 billion a month, that’s out of the market. So, that’s a small supply shock. There’s no ongoing pressure every day from miners who’ve been rewarded with Ethereum.
Then the staking activity, there’s currently about 9% of all Ethereum staked, by most guesses. That number should rise to about 30%. Because initially, we should see some outsized deals may be up to as high as 20%, maybe it’s 15%, who the hell knows.”
“It’s going to attract a lot of capital into staking. And so, that becomes very interesting itself, because if it gets up to 30% of all ETH staked, that’s 30% that is dormant,” the former Goldman Sachs executive continued. “That 30% cannot be used for DeFi [decentralized finance], CeFi [centralized finance], rehypothecation, shorting, liquidity provision, nothing, it’s out of the system,” Pal added.
Okay, that is a massive supply shock.
Ethereum’s potential once the upgrade is in place is massive, Pal said. ETH has the potential to become a deflationary asset and predicted that the digital asset might well become a far more interesting option for investors than Bitcoin:
“So, I think a lot of this activity is getting very interesting. If I start looking at price, we’ve talked a bit about Bitcoin, but if I look at the chart of Ethereum versus Bitcoin, to me, it’s very close to breaking out of this downward channel. And as you know, I’ve been overweight Ethereum for a long time now, and it’s paid off very well. And I expect it to have another leg higher. So, I’m more interested in Ethereum than Bitcoin.”