Can Ether Knock Bitcoin Off The Top Spot?

Can Ether Knock Bitcoin Off The Top Spot?
Stéphane Renevier, CFA

almost 3 years ago5 mins

Mentioned in story

What’s going on here?

Bitcoin versus ether: it’s the Rocky versus Apollo of the 2020s – a truly legendary rumble that’ll resonate through the ages. But there’s only one way to decide which one will land the knockout blow…

What does this mean?

Ether’s outperformed bitcoin significantly over the past year, and not just in terms of price (though ether’s more than 1,500% gain puts bitcoin’s 470% to shame). It comes out on top across a host of key metrics too: transaction fees, number of transactions, growth of new addresses – the list goes on.


So can ether keep floating above bitcoin like a butterfly, or is bitcoin about to sting like a bee? Ding ding ding...

🦋 Ether’s uses are theoretically endless

Ether was just built to do more than bitcoin, which is effectively just a store of wealth. Ether powers and is used for fees in a wider network – ethereum – that hosts all sorts of in-demand blockchain-based solutions. Solutions like decentralized finance, or DeFi: most of its applications are hosted on ethereum, which means its growth potential is looking particularly promising. And that’s not all: open-source lending, NFT-hosting, financial platforms – the uses of ether are potentially endless.

🐝 … but bitcoin doesn’t need to be “useful”

The ethereum ecosystem may be on the rise, but that doesn’t necessarily translate into 1:1 price growth for ether. If bitcoin is digital gold, think of ether like digital oil – fueling and enabling the apps and services running on the network. As with oil, there are plenty of other factors impacting its price, from unexpected changes in supply to sudden shifts in demand on the whims of speculators. Keep in mind, too, that oil is far more useful than gold, but there have been plenty of times throughout history when the shiny metal has outperformed the dusky nectar…


🦋 Ethereum’s about to get an upgrade

Ethereum 2.0 could be a game-changer: the network’s scalability, speed, security, and efficiency should all get a massive boost when it switches from “proof-of-work” to “proof-of-stake” (among plenty of other developments). That shift could also lead to more ether being destroyed than created, which would transform the cryptocurrency into a deflationary asset. That shrinking supply – coupled with increasing demand – would eliminate one key advantage bitcoin has maintained over its rival, and should be good news for ether’s price.

🐝… but bitcoin is the finished product

Ethereum 2.0 has a real risk of failure given how complex it is. Its developers have been working on it for years, in fact, and its launch date has been pushed back several times. More worrying still, the promised final product seems to keep changing. That not only makes bugs and hacks more likely, it also makes it hard to anticipate what will and won’t be possible when the final version goes live. Compare that to bitcoin, whose greatest weakness – that it’s already a “final product” with no room for innovation – could also prove greatest strength.

🦋 Ether is made for the financial markets

According to investment bank JPMorgan, the amount of ether traded on its platform in a given day is much higher than bitcoin, which makes it much more liquid and much more resilient to sharp downturns. More importantly, the quality of demand for ether has been improving, with institutional investors and major corporations buying in and turning it into a more stable source of growth.

🐝 … but bitcoin does one thing really well

Ethereum’s still the blockchain of choice for developers of decentralized apps (dApps), but it might not be forever: smaller platforms like Cardano, Polkadot, and Tron all have a real shot at eating into its market share. For one thing, they all propose improvements on a variety of perceived weaknesses in the ethereum network. And for another, ethereum can’t be all things to all people, and dApp developers are likely to favor a more specialized network that better fits their needs. Bitcoin, meanwhile, has no close match as far as store of value goes, and it’d take years for another crypto to replicate its established brand.

So can ether beat bitcoin?

Sure, ether could have more upside potential than bitcoin if all the pieces of the puzzle fall into place. But that’s a really, really big if.

At the moment, bitcoin has a tried-and-tested formula down pat, and it’s a cleaner, simpler, and safer bet to replace traditional currencies. That arguably makes it a far more compelling investment.

But here’s the thing: Rocky this ain’t. You don’t have to root for just one winner. In fact, there are strong diversification benefits to be gained by investing in both. And given the potential of dApps, NFTs, and DeFi to disrupt the financial industry (and plenty of others), it’s well worth finding space to fit ether – along with some of its smaller competitors – into your portfolio. If it all pans out, after all, you’ll be running up the steps in Philadelphia and punching your fist in the air like there’s no tomorrow.

Key takeaways:

  • Ether’s outperformed bitcoin across a host of key metrics over the last year, from price to transaction fees.
  • And ether’s got a lot going for it, including potentially infinite uses and ethereum 2.0. But bitcoin does what it does so well, it doesn’t need multiple iterations.
  • Ultimately, bitcoin’s probably a safer bet than ether. But that’s not to say you shouldn’t diversify across the both of them.


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