Is Ethereum Burning Bad for Bitcoin? Only Time Can Tell
Ethereum burning may affect Bitcoin— must-known info for crypto investors!
Crypto burning is one of the latest phenomena in the cryptocurrency market, call them innovative or criticize them as shady that the world itself is not short of a number of acts that surprise us. To be a little more specific, the crypto here connotes Ethereum tokens and the ‘burning’ refers to the process of relegating them to a wallet that is inaccessibly known as Ethereum burning. The outcome of Ethereum burning in the real sense and this mode of virtual burning is all the same: those cryptocurrencies are lost forever. This can affect the top cryptocurrency in the market, Bitcoin, in the nearby future.
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While the impact of the quantum of Ethereum burning can be viewed and verified with little effort, thanks to the blockchain technology, the fact is that once they are ‘burnt’ they cannot be accessed, neither by the developers nor by the cryptocurrency market members, and obviously by none else. Negotiating the high gas fee that marks Ethereum transactions and the consternation that it has raised in many quarters is an important issue that concerns the burning act. But the major factor that leads to the decision of cryptocurrency burning is to control the pricing of the Ethereum and bring in deflationary effects. If one measures the reaction, the curious act of Ether burning makes the investors happy for the simple reason that a lesser number of cryptocurrencies in circulation ensures much greater value vis-à-vis their investment. It also makes the miners happy as they attain better value for their labor as a result of Ethereum burning. Thus, we see a rare case of ‘happiness’ on all sides. So, the burning act goes on.
How Ethereum burning can adversely affect Bitcoin?
There is an ongoing concern about the possible adverse impact of Ethereum burning on Bitcoin. There is one strand of argument that may put Bitcoin on the back foot. However, one need not hastily lead to any conclusion. It is true that early last year Bitcoin witnessed a dip in value. Then again, there is the case of Elon Musk who retracted from his previous decision of distancing from Bitcoin and asserted by mid-2021 that Tesla may resume the use of Bitcoin. This resulted in Bitcoin regaining its value to some extent. If there are more such financial barons ready to resume or reconfirm their faith in Bitcoin, chances are that it will have much positive effect on that cryptocurrency in the highly volatile cryptocurrency market.
The game, if there is any, between Ethereum and Bitcoin is a game involving the projection of scarcity. Even if reports come in about millions of Ethers being burnt, the Ethereum burning act may only be a small percentage of the total number of coins being mined and transacted in the cryptocurrency market. On the other hand, despite the frequent warnings from the Bitcoin developers that with a limited number of 21 billion Bitcoins there is bound to be a “severe scarcity” there are observers who ask us to take it with a pinch of salt.
Let us come to terms with the fact that with the cryptocurrency market remaining ‘shadowy’ with much lack of transparency any definitive judgment about the impact of Ethereum burning on Bitcoin transactions is not yet possible and one can only indulge in informed guesses at best or speculative ventures at worst. ‘Only time can tell’ is the most appropriate way to conclude this article.