First Mover: Digital Gold Narrative Could Be Bitcoin's Lone Ace as Ethereum Gains

Bitcoin's "digital gold" narrative looks promising as ever, but the cryptocurrency's dominance is waning as Ethereum rides DeFi fever.

AccessTimeIconSep 21, 2020 at 1:36 p.m. UTC
Updated Sep 14, 2021 at 9:58 a.m. UTC

It's pretty much guaranteed at this point that higher inflation is coming.

The Federal Reserve, which has already printed about $3 trillion of new money this year, is now explicitly devoted to reducing the dollar's purchasing power in a bid to revive the economy. Higher inflation also typically happens when a country gets laden with debt and interest rates are cut to zero, as is now the case in the U.S.

"We're at a moment where you may see some inflation," Federal Reserve Bank of St. Louis President James Bullard said last week.   

The trend could be good for bitcoin, which many crypto investors believe can serve as a hedge against inflation, a digital and perhaps more portable alternative to gold. As detailed last week by SeekingAlpha contributor Lyn Alden, the trend has been clear since roughly 1980, when the share of wealth held by the world's richest 0.1% of people began a decades-long rise from about 5% to more than 20%. 

CoinDesk - Unknown
The decades-long economic trend toward the moment where high inflation occurs began around 1980, when the share of wealth held by the richest Americans started increasing.

But increasingly, it looks like bitcoin-as-inflation-hedge might be the cryptocurrency's most compelling investment narrative, and not necessarily as the dominant digital asset for perpetuity, as many so-called bitcoin maximalists have argued. 

Last week, bitcoin's "dominance" – the market value of all bitcoins in existence, divided by the market value of all digital assets – fell to 57%, from 68% at the start of the year, according to CoinMarketCap.

The primary challenger, of course, is ether (ETH), the native token of the Ethereum blockchain, which has exploded with activity this year as the primary venue for the fast-growing realm of decentralized finance, or DeFi. Ether's market value has climbed to about 12% of the industry total, from about 6.8% at the start of the year. 

"The rivalry between Bitcoin 'maximalists' and Ethereum enthusiasts has become more polarized in recent months, with each side latching on to narratives that best support the asset to which they have pledged their allegiance," Kevin Kelly, co-founder of the market-analysis firm Delphi Digital, wrote this month in report. And recently, Ethereum has been "playing catch-up to its 'digital gold' counterpart."

CoinDesk - Unknown
Bitcoin's market dominance has been sliding this year.

Bitcoin Watch

CoinDesk - Unknown
Bitcoin transfer volume from mines to cryptocurrency exchanges.

Bitcoin is again taking cues from traditional markets.

The leading cryptocurrency is dropping alongside stocks, with soaring coronavirus cases across Europe and other parts of the world threatening to snuff out the nascent global economic recovery.

Bitcoin is currently down over 2% at $10,650 and may suffer a more significant drop if the risk aversion worsens, boosting demand for the safe-haven U.S. dollar. The cryptocurrency tanked 40% on March 12 as the global stocks' coronavirus-induced crash triggered a global dash for cash.

The recent rise in the outflow of coins from miner wallets to exchanges could add to bearish pressures around bitcoin.

On Sunday, 784 BTC were transferred to exchange wallets from miner wallets – significantly higher than the 30-day average daily outflow of 265 BTC, according to data source Glassnode.

– Omkar Godbole

Token Watch

Curve (CRV): Decentralized stablecoin exchange starts new dividend program for holders of governance token.

Ether (ETH): Ethereum transaction fees hit a record as developer Danny Ryan says 2.0 upgrade will radically improve network performance and security.

Enigma (ENG): Privacy-focused blockchain startup says its tokens "lack features" of securities, but registers them with regulators anyway in filing tied to February settlement with U.S. Securities and Exchange Commission.  

What's Hot


The latest on the economy and traditional finance

Tweet of the Day

CoinDesk - Unknown
Sign up to receive First Mover in your inbox, every weekday.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.