Drake believes Bitcoin faces long-term security risks due to its reliance on block subsidies. On the other hand, Bitcoin advocates argued that advancements in mining efficiency and energy use will ensure Bitcoin’s sustainability. Meanwhile, the crypto market briefly dipped after Trump’s announcement of new tariffs but quickly rebounded. As a result, analysts are divided on Bitcoin’s future, with some predicting a surge to $700,000 due to liquidity injections, while others expect a correction. Ethereum’s Ultra Sound Money Narrative Gains Strength Ethereum Foundation researcher Justin Drake started a fresh debate between Ethereum and Bitcoin communities after arguing that Ethereum will soon become “ultra sound” money while Bitcoin faces long-term sustainability risks. In a post on X, Drake stated that for Ethereum to regain its “ultra sound” status, either its issuance has to decrease or the amount burned must increase, and he believes both will happen. Ethereum became deflationary after the Merge in 2022, but the trend reversed in April of 2024 after the Dencun upgrade that reduced fees for layer-2 networks and the overall amount burned. After comparing Ethereum’s issuance with Bitcoin’s, Drake pointed out that Bitcoin added 657,000 BTC to supply since the Dencun upgrade, while Ethereum added only about 469,000 ETH. At current prices, the Bitcoin supply increase is worth approximately $63.4 billion, whereas the Ethereum issuance adds up to just $1.23 billion. This means Bitcoin’s supply growth rate of 0.83% per year is 66% faster than Ethereum’s. (Source: X ) Drake placed a lot of emphasis on the fact that Bitcoin’s fixed supply cap of 21 million could lead to long-term security risks, as miners predominantly rely on block rewards for revenue. In fact, 99% of earnings over the past week came from block subsidies, with only 1% derived from transaction fees. He warned that this model could leave Bitcoin vulnerable to security threats, as the cost of a 51% attack, which is estimated at $10 billion and requiring 10 gigawatts of power, could be relatively affordable for nation-states. Ethereum educator Anthony Sassanois is also concerned about this, and criticized Bitcoiners for failing to recognize what he called an “obvious catastrophe” in the making. Bitcoin advocates, however, pushed back against Drake’s opinions. Analyst James Check argued that critics did not consider crucial factors like advancements in energy technology, improvements in mining efficiency, and the economic incentives that drive Bitcoin’s sustainability. He compared Bitcoin’s future transaction fees to the cost institutions pay for secure gold storage, and suggested that as Bitcoin adoption grows, fees will naturally sustain network security. Check also touched on the role of ASIC mining hardware, and mentioned that when miners go bankrupt and sell their rigs at lower prices, new entrants benefit, ensuring the network remains competitive. He also argued that energy developments, particularly in nuclear power and wasted energy utilization, will greatly reduce mining costs. Bitcoin mining can help stabilize energy grids by providing demand response, potentially lowering maintenance expenses for grid operators. Some energy providers might even find it beneficial to mine Bitcoin at a loss to offset infrastructure costs. He dismissed Drake’s claim that buying the necessary power for a 51% attack is relatively easy, and called it an “unserious” assertion that overlooks the complexity of energy markets and infrastructure constraints. Drake acknowledged that Ethereum is not without its own challenges. He shared that excessive staking could reduce ETH’s effectiveness as “pristine” collateral, and systemic risks exist within liquid staking platforms like Lido. To address these concerns, he proposed the “Croissant Issuance” model, which will implement a declining supply issuance mechanism. Under this model, issuance will drop to zero once 50% of ETH is staked, with a peak issuance rate capped at 1% per year to allow the market to find equilibrium. (Source: X) While Ethereum supporters firmly believe in its adaptive economic model and deflationary tendencies, Bitcoin advocates are also still very confident that advancements in technology and incentives will ensure its sustainability well into the future. Bitcoin and Ethereum Bounce Back After Market Dip The crypto market recently experienced a temporary decline after an announcement from US President Donald Trump about new tariffs on aluminum and steel, which only escalated the ongoing trade tensions. According to a report by the Associated Press on Feb. 9, Trump declared that all steel and aluminum imports into the United States will be subjected to a 25% tariff. He also stated that the US will implement reciprocal tariffs against countries imposing high import fees on American goods, and argued that the current trade balance was unsustainable. The announcement triggered a quick reaction and swift declines in the crypto markets. Bitcoin briefly dipped to $94,000 before recovering and climbing back above $97,000, according to CoinMarketCap. Ethereum followed a similar trajectory after falling to $2,537. The overall cryptocurrency market cap fell from $3.15 trillion to $3.10 trillion but was able to regain its ground. Bitcoins price action over the past 24 hours (Source: CoinMarketCap ) According to the Crypto Fear & Greed Index , market sentiment stayed in fear territory over the past week at an average score of 44 out of 100. The latest update on Feb. 10 recorded a slight decline to 43, down from 46 the previous day. The uncertainty surrounding US trade policies and their potential impact on global financial markets seems to be contributing to more cautious investor sentiment. Crypto fear and greed index (Source: Binance ) Trump also recently indicated plans to introduce additional tariffs on various sectors, including the European Union, superconductors, oil, gas, steel, and copper. Earlier in the month, he imposed 25% tariffs on major US trading partners Canada and Mexico, along with a 10% tariff on Chinese imports. These actions led to sharp declines in both stock and crypto markets. Estimates suggest that liquidations during this period may have reached as high as $8 billion to $10 billion, according to Bybit co-founder and CEO Ben Zhou. The crypto market rebounded after the planned tariffs on Mexico and Canada were temporarily suspended for 30 days on Feb. 3. However, Trump has not ruled out reinstating these tariffs once the pause period expires. Liquidity Injection Could Boost BTC to $700K Despite the hesitation in the market about crypto’s next move, some analysts are still extremely optimistic. Bitcoin is set to reach an unprecedented $700,000 this cycle due to a massive liquidity injection, according to Bill Barhydt , founder and CEO of crypto asset manager Abra. In a series of X posts on Feb. 8, Barhydt predicted that a surge in liquidity, driven by the new US administration under President Donald Trump, will propel Bitcoin and other cryptocurrencies to record highs. He described this upcoming market phase as “ cyclical Valhalla ,” and expects it to begin in the first quarter of the year. Barhydt’s base case scenario puts Bitcoin at $350,000, Ethereum at $8,000 and Solana at $900. He attributed this bullish outlook to the administration’s desire for lower interest rates, alongside an urgent need to refinance over $7 trillion in debt. Tax cuts and other economic measures could lead to an influx of liquidity, whether through quantitative easing or similar mechanisms, which will significantly benefit risk assets like cryptocurrencies. He also suggested that the high-end range for these predictions could see values nearly double. Not everyone shares this optimism. Arthur Hayes, former CEO of BitMEX, warned that the new administration will not be an immediate catalyst for continuous price growth. He believes that as the global market realizes that US politics have not changed dramatically, crypto prices could decline to late 2024 levels. Hayes predicted a Bitcoin correction to $70,000–$75,000 before any major upward movement.
