Supply is important in crypto, but even more important is knowing how the supply will behave throughout time. Knowing how the supply will behave throughout time can make it or break it for some investors... investors like me for example.
I don't like forever inflationary currencies except in very special cases, cases like STEEM for example, where we need inflation to pay for more posts to create more value to increase the price, inflation is also used to pay for the chain's security and the current inflation enables the coin to become more decentralized throughout time. Inflation can be used in the right way, but many cryptos don't use it the right way...
Many cryptos put really high inflation that devalues the coin down to hell! And even worse are the cryptos that do this and have no sort of hodling mechanism like STEEM provides with Steem Power.
Ethereum was one of these...
Ethereum doesn't have any max supply, the inflation can decrease with time, but in the end, it will still have no max supply. The incentive to hodl in PoW systems like Ethereum is just one, speculating that the price will increase with time to sell at a higher price... No max supply and no really good incentive to hodl is, in my opinion, a recipe for disaster! I said 2 years ago that Ethereum was going to crash, ICOs had no reason to hodl ETH, all the ICO money would be dumped on the market and the price would crash... and it happened... the price crashed.
But this is changing and fast! Ethereum is changing, and in my opinion for the better!
First, Ethereum is going to change to PoS, this means that the incentive to hodl ETH is going to skyrocket! ICOs and STOs don't need to dump their ETH, they can just put nodes up and get a passive income ETH to pay for their user's gas costs, and for business expansion.
Not only this but the move to PoS will decrease the costs of running nodes. Nodes won't need to secure the chain via PoW, they will secure it by staking their ETH's value as collateral, so the nodes won't need as much inflation to support their mining equipment, which will allow for a decrease in inflation.
With just this move to PoS, we have both a HODL incentive and a decrease in inflation...
Second, DeFi just surpassed $1B locked up, DeFi is becoming a really good hodl mechanism for the ones that want to use their value to make more value... Inflation will never go down to 0% because Ethereum prioritizes paying the nodes first, paying for security first, but with enough DeFi and new nodes, Ethereum can get all the new ETH created from inflation locked up. If demand doesn't go down and all the new supply is being locked up in DeFi the price will only have one way to go... UP UP UP and away.
Third, I'm amazed at this one, EIP1559 is a really smart move and can make ETH's price go exponentially up! EIP1559 is, like David Hoffman wrote, The Final Puzzle-Piece To Ethereum's Monetary Policy, what EIP1559 basically does is burning the majority of ETH that is used as gas... Burning!
Many people don't like Burning, but a good well-designed burning mechanism, which is something that not many can design, can actually make the inflation turn into deflation! That's right! Inflation can be negative! With enough transactions happening on Ethereum we can actually have more ETH being burned than it's being created, and with this mechanism plus the other two, we can have less and less supply on the market, less supply with more demand for dapp usage leaves only one place for the price to go... upwards.
As the space evolves people are starting to realize that the old HODL mentality doesn't always work, the tokenomics are changing, projects are trying new and different things, even Bitcoin is starting to see this...
Most BTC hodlers say they want to hodl BTC because they want to own their own money, to have censorship-resistant money,etc..etc... but let's be honest, a lot of the people that HODL BTC are just waiting for new highs to sell, I have two such examples of hodlers in my house... but with the Lightning Network, this is going to change too.
The lightning network allows something similar to staking where a person puts some sats as collateral and gets a return in BTC for confirming transactions, the more BTC is staked in the Lightning Network node the more BTC one can get from confirming transactions.
Regardless of this, with this Ethereum move, I'm becoming more and more bullish on Ethereum. Prioritizing security through inflation, putting HODL and deflationary mechanisms in place and having the highest number of ecosystem devs makes ETH probably one of the best investments in crypto right now, and I'll very soon start my bag of ETH to hodl on Celsius to earn interest.
Images Free Source - 1, 2,3,4,5,6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27 - Tradingview snapshots too.
Question of the day: Do you have an ETH bag? If yes, what makes you bullish on it? If not, why not?
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