Was Ethereum 'ultrasound money' a mistake? ETH down 65% vs. BTC since pivot

Ethereum has failed to remain deflationary since the switch to Proof-of-Stake, as ETH's price has disappointed Ether investors, particularly against Bitcoin.

Ether (ETH) has dropped roughly 65% against Bitcoin (BTC) since Ethereum’s 2022 shift to Proof-of-Stake (PoS), casting doubt on the network’s “ultrasound money” thesis.

Lower fees and L2 growth have weakened Ethereum’s deflationary “ultrasound money” pitch.

Ether has lagged behind BTC because investors trust Bitcoin’s fixed supply schedule.

The idea behind “ultrasound money” was that Ether would become even scarcer than Bitcoin.

Supporters argued that Ethereum’s 2021 EIP-1559 upgrade, which began burning a portion of transaction fees, combined with the sharp decline in new ETH issuance following the 2022 Merge, would make Ether deflationary over time.

ETH’s new annual supply rate has averaged about -0.19% after the burn mechanism went live in 2021, according to Ultrasound.MONEY.

Since Ethereum’s shift to PoS in 2022, however, ETH supply has grown at an annualized rate of about 0.23%, though lower than Bitcoin’s current annual inflation rate of 0.85%.

However, Ethereum’s supply growth since the Merge undermines the promises of deflation. ETH turns deflationary only when mainnet activity is sufficient to burn more coins than the network issues to validators.

That condition has weakened. Ethereum’s average transaction fee is about $0.21 in March, down roughly 54% from a year earlier, according to YCharts.

Lower fees mean the Ethereum network burns less ETH.

Moreover, most of Ethereum's activity has moved to cheaper layer-2 networks. L2beat shows rollups handling 926 user operations per second (UOPS) on March 7, compared to just 22.36 on Ethereum’s mainnet.

While the shift helps the network scale, it weakens the burn-heavy conditions required to make Ethereum deflationary.

Ether price has underperformed BTC partly because investors trust Bitcoin’s fixed supply, according to analyst Handre.

Bitcoin’s strictly enforced 21 million coin cap and fixed supply schedule appeal to investors as it makes BTC more predictable in the longer term. This resistance to change makes Bitcoin stand out from the monetary policies of most altcoins.

“Every scaling debate, every upgrade proposal, every attempt to change Bitcoin's monetary policy has failed because the economic majority understands what they're protecting,” Handre said.

Related: Ether’s path to $2.5K may be trickier than expected: Here’s why

Ethereum, by contrast, is not as predictable when it comes to monetary policy, particularly now that ETH supply is growing modestly again.

The investors’ preference is visible in the United States’ ETF market. As of March, spot Bitcoin ETFs held more than $91.9 billion in assets under management, compared with about $12.1 billion for spot Ethereum ETFs.

Ether never delivered a convincing breakout in dollar terms either.

Between 2021 and 2026, ETH only marginally exceeded its previous all-time high near $4,800 before losing momentum, unlike Bitcoin, whose price doubled from the 2021 peak to the 2025 record high.

The underwhelming performance by ETH over the past five years suggests that reduced issuance alone was not enough to create sustained new demand.

Sentiment has also been pressured by periodic ETH sales linked to Vitalik Buterin and the Ethereum Foundation.

Public criticism from Culper Research, which said it was short Ether due to Buterin’s selling, has amplified the view among some traders that Ethereum’s insiders are distributing into strength rather than reinforcing long-term conviction.

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Source: CoinTelegraph