“Bitcoin’s demand and appeal come from its fundamentals: decentralised, deflationary p2p money, whereas ethereum’s « appeal » come from the entrepreneurial, active strategy of its foundation, and its marketing/fundraising efforts”

Tweetstorm by @sovereign_ind :

1. A few thoughts about the recent ETH bull run:

2. Main driver is the fact that the ETH that’s raised in ICOs leaves the speculative flows and will be spent over years by the “companies”.

3. This drives the ETH price, driving up perception of the value of the whole network and guaranteeing it news coverage.

4. My guess: most of these companies are quasi-scams. They’ve a veneer of relevance/usefulness, but their projects are pie-in-the sky...

5. and will never turn a profit.This gives plausible deniability to the founders:

6. “we underestimated the challenge”, “there was a learning curve”, “pioneers don’t always make it”…

7. Those founders are lying to themselves as much as they’re lying to the investors. Truth and fiction just blur into one mess of...

8. ...superlative claims with no technical backing.

9. They will spend the ether they raised very slowly, which aligns with the interests of the ethereum foundation and its objective of...

10. ..driving up the price.

11. The Dark Lord Vitalik himself endorsed/served as an advisor to several ICOs. I think that this is a conscious, calculated strategy:

12. to drive up ETH price as high as possible, to gain ground in the media and in investor’s minds…

13. ... and then switch to PoS before the consequences of its mon. policy are felt.

14. So theoretically, if ETH had the properties of sound money, it could leverage its recent media exposure...

15. to gain value as a legitimate currency with desirable currency-attributes.

16. But this isn't going to happen. ETH lacks all the characteristics of sound money.

17. At some point the appetite of investors for these scams will be more than satiated, and ETH’s undefined, currently inflationary...

18. ...policy will prevent its monetary properties from picking up the slack.

19. But as the saying goes, the market can stay irrational loger than you can stay solvent.

20. This is particularly true when network effects and feedback loops are in play.

21. You typically don't see network effects in stocks or other assets.

22. but cryptocurrencies are protocols, and network effects make or break protocols.

23. Since ETH is a currency, and not a company, it doesn't have to make a "profit".

24. And none of those companies who ICOed have to actually make any profit for ETH to grow

25. or sustain its valuation. There's no pullback force.

26. Current consensus is that one cryptocurrency will become global money within two decades. But Mr. Market asks, which one?

27. If there's a perception by part of the markets that ETH can win this "duel of coins" and reach global dominance as a currency...

28. Then the discrepancy between its price and its fundamentals could be much greater than even that of a dotcom stock.

29. So I think it’s impossible to call the top on ETH/BTC, and it's dangerous to short this pair.

30. Assuming PoS is workable, there’s a way this could work. But Ethereum will remain politically/culturally centralised for a long time.

31. And it having already forked will make it less credible as a store of value than bitcoin.

32. An interesting difference between ethereum and bitcoin: bitcoin’s demand and appeal come from its fundamentals:

33. decentralised, deflationary p2p money…

34. …whereas ethereum’s « appeal » come from the entrepreneurial, active strategy of its foundation, and its marketing/fundraising efforts.

35. BTC’s appeal: store of value, decentralisation.

36. ETH’s appeal: none IMHO, but to those who value it, store of value isn’t what motivated their choice.

37. ETH also has low “investor quality” (uninformed speculators, completely unaware of the technological/economic fundamentals of ETH).

38. BTC investors’s base, on the other hand, has hodled through all the FUD of the scaling debate, and has learned many hard lessons.

39. All bitcoin has to do is to remain what it is: deflationary, decentralised, immutable. ETH/BTC can climb to scandalous heights,...

40. ...without being a threat to BTC/fiat.

41. Because the fuel pumping ETH/BTC higher doesn’t not come from the same tank as the fuel pumping BTC/fiat higher.

Source: https://twitter.com/sovereign_ind/status/875876199272247296