Here’s why Arthur Hayes thinks Ethereum doesn’t qualify as money

Arthur Hayes, a former CEO of BitMEX, recently detailed why he thinks Bitcoin is money and Ethereum is not. He discussed the upcoming Ethereum Merge’s deflationary economics and why there are more factors at play when creating a successful financial instrument.

On Tuesday, during an interview with Unchained podcast, Hayes said that he believes that ETH cannot be used as money even if it also has other uses.

Hayes: Ethereum has different purposes

He stated that Ethereum has a purpose and may be used to fuel the applications running on its network. Ether serves as both a cryptocurrency and the power behind Ethereum’s smart contracts. It can also be used to pay network fees for exchanges of other tokens.

Comparing it to Bitcoin, which is supported by a network without tokenization and has minimal smart contract features, Hayes said that because BTC’s value cannot be correlated with the actual utility of “other stuff,” it is a good form of money.

It has long been acknowledged that Bitcoin has a fixed supply of 21 million coins that cannot be changed. As a result, it resists inflation and monetary debasement, gaining the label “sound money” in some communities.

However, other cryptocurrencies, like BNB, have chosen a token-burning mechanism that makes use of network transaction fees. These characteristics make such cryptocurrencies fixed in supply as well as net-deflationary, which is theoretically positive for holders.

After the merger, Ethereum is anticipated to adopt a similar approach and turn into a net-deflationary coin. By March 2023, according to Hayes’ prediction, ETH price might reach $5000. He further explains:

“Let’s say the deflation gets so severe that it becomes so expensive that nobody uses it… well, guess what’s going to happen? They’re going to change the inflation rate. It contradicts the goal of Ethereum being a decentralized computer that average people can actually use.”

Notably, as TheCoinRise reported in August, former BitMEX CEO believes that The Merge will rally Ethereum similar to how Bitcoin halving rallies Bitcoin.