Ethereum is widely used for smart contracts and decentralized applications (DApps), but its value is typically measured in fiat currencies, like the dollar. Demand for ETH, and consequently its price, is influenced by the inflow of capital from traditional markets.
If a large amount of dollars were printed and none of it made its way into the crypto market, Ethereum’s price would likely remain unaffected or even drop due to reduced purchasing power. This emphasizes the connection between Ethereum and fiat, where inflation in the dollar would directly affect ETH’s value. Ethereum’s growth is tied to market cap increases and demand, both of which depend on the broader economic system.
Mises’ theorem suggests that currency requires a reference point for value. Ethereum’s reference isn’t a physical commodity, but rather fiat currency, such as the dollar. Without these monetary systems, the value of ETH would likely be difficult to sustain.
About the Interdependence with Traditional Systems
Though Ethereum is revolutionary in its technology, it still relies on the traditional financial system for its valuation. Unlike commodities like gold, ETH has no intrinsic value universally recognized. It operates within a framework where fiat currencies, especially the dollar, provide context for its worth.
Your argument highlights that Ethereum would struggle to hold its value without the broader financial system. Dollar inflation affects Ethereum because it relies on inflows of capital from investors who predominantly deal in dollars. This interdependence shows that Ethereum, while decentralized, is not fully detached from traditional financial structures.
Although Ethereum didn’t originate from a physical commodity, it is still influenced by the traditional financial system, where its value is determined in terms of fiat currencies. As such, Mises’ regression theorem remains relevant, even in the world of cryptocurrencies, as the value of Ethereum remains linked to the financial systems Mises studied.
