Can Ethereum Outperform Bitcoin: With a combined 70% of the market cap, Bitcoin (BTC) and Ethereum (ETH) are the two most important cryptocurrencies. Bitcoin went from being an innovative idea to a widely used digital currency as it gained acceptance from major financial institutions across the world. On February 26th, the market capitalization of Bitcoin was more than $1 trillion.
The massive Bitcoin holdings of companies like Tesla and MicroStrategy further attest to the cryptocurrency’s widespread appeal. In addition, the SEC’s recent green light for spot Bitcoin ETFs shows that institutional investors are warming up to the cryptocurrency. Alternatively, Ethereum’s market cap is approaching $370 billion, making it the second-largest player. The blockchain technology that powers Ethereum is the backbone of a wide variety of decentralized applications (apps).
To further address scalability, energy consumption, and security concerns, the platform underwent a significant technological leap in 2022 with “The Merge” which involved switching to a proof-of-stake consensus method. For a long time, people in the cryptocurrency industry have thought about what some call “the flippening,” an event in which Ethereum’s market valuation may overtake Bitcoin’s. Is it possible for Ethereum to eventually surpass Bitcoin?
BTC vs ETH: Market cap and Dominance
Since 2009, Bitcoin has led the cryptocurrency sector with a market valuation that exceeds its competitors. Bitcoin’s market cap rose 1,000-fold from $1 million in early 2011 to $1 billion in early 2013. Near the end of 2013, Bitcoin was worth $9 billion.
Bitcoin’s market valuation surpassing $300 billion in 2017 marked a turning point. This increase was caused by institutional and individual investors’ purchasing frenzy and rising interest in cryptocurrencies as a new asset class. Despite this remarkable climb, there were challenges. Bitcoin’s market cap reached $1 trillion in November 2021 but dropped to $320 billion in December 2022.
Ethereum proceeded more slowly. From its humble beginnings in 2015, Ethereum quickly became one of the top five cryptocurrencies by market cap. Bitcoin’s $6 billion market valuation dwarfed Ethereum’s $60 million in December 2015. Ethereum’s market worth grew 1210 times from $60 million in December 2015 to $73 billion in December 2017. This growth reduced Bitcoin and Ethereum’s market capitalization ratio.
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And “Bitcoin dominance”—defined as Bitcoin’s market cap relative to the overall cryptocurrency market—became an essential barometer for industry movement. Because Bitcoin fell behind, altcoins, led by Ethereum, declined from over 90% to less than 45% by December 2017. This ratio dropped further to 2:1 in December 2021, when Bitcoin was worth $960 billion and Ethereum $483 billion. At 2.75:1 on February 25, various bullish Bitcoin scenarios, such as the Bitcoin halving in April 2024 and the SEC’s approval of spot BTC ETFs in January 2024, might tip the scales in Bitcoin’s favor.
Real-world Contributions of Bitcoin and Ethereum
As time has progressed, Bitcoin and Ethereum have made more separate contributions to the cryptocurrency industry, developing distinct use cases and propelling innovation in opposite directions.
Bitcoin’s expanding ecosystem
The ecosystem around Bitcoin has grown substantially, especially with the introduction of new tools and services. Launching spot Bitcoin ETFs in January 2024 is anticipated to make a huge splash, elevating Bitcoin’s profile in the global finance industry and making it more accessible and appealing to a wider audience.
An “explosive growth in Bitcoin use cases” was recorded by Trust Machines in the first quarter of 2023, indicating that developers are becoming more interested in creating on top of Bitcoin. This expansion is because of the Stacks (STX) blockchain, which allows for applications, smart contracts, defi apps, NFTs, and more to be built directly on top of Bitcoin, making it useful for more than just storing wealth.
With the introduction of ordinals in January 2023, Bitcoin’s use cases were expanded to include the ability to directly attach information to individual satoshis through a procedure known as “inscribing.” The development of Bitcoin-native NFTs is a significant step beyond Bitcoin’s initial use case as digital money, made possible by this breakthrough. In the meantime, the ECB’s working paper emphasizes how EMDEs have embraced Bitcoin, seeing it as an investment, a protection against currency depreciation, and a way to ease international transactions.
Ethereum’s diverse utility
However, Ethereum’s built-in smart contract features have made it a pioneer in enabling a diverse array of decentralized applications (apps), decentralized financial platforms (defi), non-fungible tokens (NFTs), and more. The ability to mint NFTs directly on the Bitcoin blockchain and the launch of Ordinals are both noteworthy developments, but Ethereum still has the upper hand when it comes to NFTs.
Ethereum has been the preferred platform for NFT development and trading due to its existing standards, such as ERC-721 and Ethscriptions. This is in contrast to Bitcoin, which has only recently entered this market, as it offers a more clear procedure. Ethereum also supports lending, borrowing, and trading via permissionless financial services, making it the foundation of the defi sector. Ethereum has the highest total value locked (TVL) of any chain as of February 26th, with around $48 billion, according to DefiniLIama.
Among blockchains, Ethereum has become the de facto standard for tokenizing physical goods. Turning asset rights into Ethereum blockchain tokens makes asset classes more liquid and accessible. According to Citi, the tokenization market has the potential to reach $4 trillion by 2030.
Can Ethereum overtake Bitcoin in the long run?
Some have compared Bitcoin to digital gold because of its stability as an investment, while others have compared Ethereum to digital oil because of its ability to fuel a wide variety of uses beyond just financial transactions. Due to its basic role in running applications like defi protocols, Goldman Sachs noted Ethereum’s considerable “real use potential” in a 2021 report.
Because of its practicality, Ethereum could one day outperform Bitcoin in terms of value, says Goldman. A dose of caution should be applied to Goldman’s forecasts, though, because they do have their share of misses. At the same time, “Mad Money” host Jim Cramer has thrown his support behind Ethereum, saying that the platform’s widespread use in buying NFTs and other digital assets makes it a strong contender to Bitcoin.
In 2030, according to Cathie Wood of Ark Invest, Ethereum’s market valuation will soar to $20 trillion, while Bitcoin’s price will hit $1 million. According to these predictions, Ethereum’s widespread use could change its standing in comparison to Bitcoin.
The road ahead
Even while people keep talking about “the flippening,” the truth is that Ethereum and Bitcoin will most likely live side by side and prosper, since they both have their uses in the crypto market. A testament to Ethereum’s immense utility and the increasing demand for its technology is the possibility that its market cap will surpass Bitcoin’s.
Bitcoin, on the other hand, will remain relevant and resilient because of its expanding use cases and its well-established reputation as digital gold. As we progress, it will be crucial to monitor how these platforms respond to new opportunities and threats in the race to revolutionize digital commerce and money.
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