VanEck: Will ETH be a better asset than BTC?

Digital asset treasuries are rapidly developing, with BTC and ETH being the most common choices. Initially, entities chose BTC due to its strong store of value properties created through monetary policy. Key to this policy structure is BTC's predictable issuance, which results in a limited total supply. Recently, Ethereum-focused DATs (Digital Asset Treasurys) have emerged. These emerging DATs consider ETH a superior choice for operating digital asset treasuries because savvy firms can engage in novel financial activities and accumulate ETH at a faster rate than BTC.

BTC treasuries can accumulate BTC by financing additional purchases, implementing complex options strategies, or lending BTC, while ETH treasuries offer greater flexibility. ETH DATs can replicate the financial strategies of BTC DATs and stake their ETH to benefit from Ethereum network returns and inflation. Furthermore, they can participate in DeFi for additional income. However, overlooked in this discussion are the fundamental differences between Ethereum and Bitcoin. Ethereum may develop an economic system that is more favorable to its token holders than BTC. Ethereum celebrated its 10th birthday on July 30, 2025. Ethereum's initial inflation rate was much higher than Bitcoin's, at 14.4% versus 9.3%, respectively. However, Ethereum subsequently underwent two major economic policy adjustments, bringing its inflation rate lower than Bitcoin's. The first adjustment, EIP 1559, was implemented in August 2021 and triggered the "burning" of ETH's base transaction fees. This change resulted in an increase in Ethereum activity, which reduced the total supply of ETH. The second major policy change was Ethereum's transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS). This transition, known as the "merge," occurred in September 2022. The merger reduced Ethereum's inflation from approximately 13,000 ETH/day to approximately 1,700 ETH/day, as it no longer needed to compensate miners maintaining its network. As a result, Ethereum's inflation rate has been lower than BTC's since March 8, 2023. Since then, ETH's supply has only grown by +0.2%, while BTC's supply has grown by +3%. In fact, the combination of these two upgrades resulted in a temporary reduction in Ethereum's ETH supply. Between October 7, 2022, and April 4, 2024, the total supply of ETH decreased from approximately 120.6 million to approximately 120.1 million, achieving an annualized inflation rate of -0.25% during this period. Since then, due to the increase in Ethereum's transaction rate (TPS), ETH destruction has decreased, and the Ethereum network has accumulated an additional supply of +0.5%. Meanwhile, the supply of BTC has increased by +1.1% during the same period.

Since March 8, 2023, ETH's inflation rate has been lower than BTC's inflation rate. Data source: Glassnode, as of July 31, 2025.

However, the superiority of ETH's inflation policy may not last long. Bitcoin's halving in April 2024 unsurprisingly reduced its inflation rate by -50%. Currently, ETH's annual inflation rate over the past year has been +0.38%, while BTC's inflation rate has been +0.84%. Over the next few halvings, BTC's inflation rate will be close to +0%. In contrast, Ethereum's inflation rate is difficult to predict and could be as high as +0.5% or even negative. Even if ETH's current inflation trajectory remains unchanged, BTC's inflation rate won't fall below ETH's until 2028. A significantly underestimated dynamic is Bitcoin's security budget. Bitcoin maintains inflationary issuance as an incentive for miners. Without it, it would rely on network transaction fees. Last year, miners earned $278 million from transaction fees and $14.64 billion from network inflation. Clearly, if miners were forced to rely solely on transaction fees, their economics would have to undergo a radical adjustment. With each halving, the price of BTC must rise to compensate for the reduction in network inflation in order to maintain miners' economic viability. If this price trajectory does not occur, network security may have to adopt a different economic model. There are many potential solutions to this problem, and no single change would have a definitive impact on Bitcoin. However, adjustments to monetary policy will inevitably have winners and losers. For example, one option to resolve the security budget dilemma would be for Bitcoin to introduce inflation through a hard fork. Regardless of the specific implementation, it would mitigate one of the core criticisms of Ethereum, namely that its economic policies are too flexible. More importantly, it would subject Bitcoin holders to taxes that favor miners. These political and economic decisions are not zero-sum, and Bitcoin, with its miner-centric nature, favors the interests of miners over those of token holders. In proof-of-stake systems like Ethereum, token ownership determines which fork validators will follow, as stake transfers to validators who choose the preferred fork. In contrast, Bitcoin's fork selection rules are ultimately determined by the miners and nodes that maintain the network's security. This creates a significant conflict of interest, favoring those who wish to sell Bitcoin to fund their operations. Ethereum, with its Proof-of-Stake (PoS) mechanism, lacks this dynamic. While every system has inherent economic trade-offs, ETH's set of trade-offs favors ETH holders, who ultimately determine the network's direction. While BTC holders do have influence on the Bitcoin network, their impact on its development is far less than that of ETH holders on Ethereum. Therefore, ETH may ultimately prove to be a superior asset class to BTC.