Alex Saunders, an Australian crypto investor and the CEO and founder of the Nuggets News education resource, has published his calculation of Ethereum (ETH) scarcity.
Ethereum S2F charted: 'Monetary policy is evolving'
The 'stock-to-flow' model, implemented for Bitcoin (BTC) by seasoned analyst and trader PlanB analyzes the scarcity of an asset. 'Stock-to-flow', in this context, means the relationship between the production of an asset and its available circulation quantity.
I charted Ethereum's current stock to flow (white) vs where it will sit in the next 1-2 years (black). Inflation will decrease with proof of stake & burning of fees (EIP1559). ETH's monetary policy is evolving. $ETH is becoming better money. 🥇🌐🖥️ Data: https://t.co/3U6tu58ceB pic.twitter.com/0K7PuRJ0nk— Alex Saunders 🇦🇺👨🔬 (@AlexSaundersAU) May 27, 2020
According to Mr. Saunders, Ethereum (ETH) S2F at the end of 2019 was 21.95. For Silver (XAG) this figure stayed at 22. So, it is the year 2020 when Ethereum (ETH) will surpass it in terms of scarcity. By the end of this turbulent year, the ETH stock-to-flow will reach 28.25.
For the calculations that cover the period of 2021-2022, Mr. Saunders assumes that Ethereum (ETH) 2.0 will be rolled out in time and Ether mining will be replaced by staking.
If this occurs, Ethereum (ETH) scarcity has a bright future.
Very low inflation in Ethereum (ETH) 2.0
Hypothetically, after the first year of the existence of Ethereum (ETH) 2.0, the ETH 'stock-to-flow' is going to skyrocket by 100%. In these terms, it will come closer to Gold (XAU) with its very high S2F of 62.
Some commenters asked Mr. Saunders about levels of inflation in Ethereum (ETH) in the Serenity epoch. According to him, inflation will eventually decrease to 2%.
This is very close to the inflation rate of Bitcoin (BTC) in its fourth era, which is estimated at 1.8%.