Despite dropping below the psychological price of $4,000, 82% of Ethereum (ETH) holders continue being in profit, according to data by market insight provider IntoTheBlock.
ETH was down by 5.04% in the last seven days to hit $3,712 during intraday trading, according to CoinMarketCap.
This year, the second-largest cryptocurrency has made significant strides thanks to various use cases on its network. For instance, it scaled the heights and soared to historic highs of $4,850 last month.
Raoul Pal, the CEO and founder of Real Vision, opined that Ethereum has outperformed Bitcoin based on the burning mechanism and staking happening on its network. He explained:
“Burning + Staking + maintained volume is why ETH has outperformed BTC by 4x in 2021. But with no net real new capital flowing into the space, attention moves to other chains which also have PoS but earlier network adoption, taking volumes away from both BTC and ETH.”
The burning mechanism was introduced by the London Hard Fork or EIP 1559 upgrade in August, which has aided in reducing Ethereum’s annual inflation rate to 1.4%. Ethereum is burnt every time it is used in transactions, making scarcity inevitable.
On the other hand, the Ethereum 2.0 deposit contract launched in December 2020 made staking a possibility on the ETH ecosystem, given that it seeks to transit the current proof of work (PoW) consensus mechanism to a proof of stake (PoS) framework.
It is touted as a game-changer because Ethereum 2.0 full upgrade is expected to trigger a 1% annual deflation rate.
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