$ECO has been losing value, sharply so against Bitcoin and Ethereum this year. Of the 10bn in ECO supply, only 0.46% is circulating with most tied to ECO Treasury. The downward pressure is, thus, narrow, likely tied to the initial launch and the realization of liquidity. Price stability motivates our proposed supply reduction.
It is also important to reflect on interest rate policy. Our 5% recommendation is in observance of the rise in short-term global USD interest rates. However, we’d like to repost what we believe is an underappreciated feature of interest rate policy.
There is an inflationary element associated with positive interest rates. Interest payments are “paid from new supply issuance as well as system reserves.” Thus, a higher interest rate would lead to an increase in $ECO supply and, thereby, inflationary pressure. The proposed supply reduction also attenuates this inflationary impulse.