You may not believe it if you’re newer to the ecosystem, but as recently as mid-late last year there were still many ETH bears proudly positing that ETH wouldn’t accrue value for one reason or another. One of the most popular talking points was to say that stablecoins on Ethereum would weaken ETH’s monetary premium and therefore it’s value. Well, as we’re all well aware, these people turned out to be completely wrong.
So, why were they wrong? I mean, stablecoin growth on Ethereum has exploded and looking at the data we can see that stablecoins are the preferred medium of exchange (MoE) because they are, well, stable. Also, to a point limzero is making in the tweet above, despite this stablecoin growth ETH has “remained the base pair currency for almost everything” - it’s used to price NFTs, as the dominant pairing asset for AMM pools, as a benchmark for market performance and more. On top of this, I think that stablecoin growth is additive to Ethereum and the detractors also miss a very important point - ETH is much more than just an MoE or UoA for the Ethereum network.
ETH’s utility is vast - it can be used to stake in eth2, be used as trustless collateral within DeFi, be used to pay gas fees (most of which will be burned post EIP-1559) and it of course can be used as money inside and outside of the Ethereum economy. This is what I think most ETH bears have been missing this entire time - they thought that ETH’s role within the ecosystem would simply be nudged out by things like stablecoins and, to a lesser extent, even tokenized BTC. But why would this happen? ETH was always going to be used as the staking asset, it was always going to kept as the asset to pay gas fees in and it will always be the only fully trustless collateral asset on Ethereum.
I remember back in June/July of 2020 (when DeFi summer was just getting started) there were plenty of people saying that it was useless to hold ETH because it wouldn’t capture any of the value generated by its network. At the time, ETH was hovering around $200 and various DeFi tokens were going up a lot in value so this was actually a popular opinion for people to hold. Sure enough, almost a year later, ETH has gone up 17.5x to $3,500 and now it’s very hard to find an ETH bear (even among notable Bitcoiners). This is why it’s always important to not get distracted or dissuaded by short-term noise and focus on the long-term fundamental value drivers of ETH - they’ve remained the same (and gotten even better) for years now.
I may be preaching to the choir here with this piece but I just think it’s useful to look back and study why the bears got it wrong because the reasons may not always be obvious (especially to newer people). ETH is and always be the beating heart of the Ethereum network and its community will always be incentivized to continue finding new ways to drive value to it - that, I believe, is the real bull case for ETH.
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.