Ethereum (CCC:ETH-USD) is up 96% year-to-date (YTD) to $1,431 as of today, and that’s after withstanding a big fall over the last two days. In comparison, Bitcoin (CCC:BTC-USD) is up just 57% to $46,345.
Moreover, in the last six months, ETH is up 298% whereas Bitcoin is up 272%. In fact, Ethereum’s outperformance continues over the past year. ETH is up 432% versus 367% for Bitcoin.
So, Ethereum is cheaper in terms of absolute dollars but has had superior performance versus Bitcoin over the last year. This is not likely to get overlooked by corporate treasurers. This is especially true for those that have started investing in Bitcoin as an alternative asset class.
The truth is more people might be willing to buy into a well-accepted crypt0 coin that has a lower absolute price. If someday that Ethereum will have the same price as Bitcoin has now, then owning more of ETH will bring a better return and more absolute dollars.
Of course, that only is true if Ethereum actually outperforms Bitcoin. Mathematically it does not matter how many absolute crypto coins you own if it is relative performance that counts.
Ethereum’s Appeal Grows
In the past, you had to set up an account in a special crypto wallet site like Coinbase to own cryptocurrencies. Now you can open up an account at Robinhood or Webull and own Ethereum or Bitcoin. Robinhood also now allows you to transfer in and out Bitcoin and other cryptocurrencies.
This is very interesting. Many Bitcoin and Ethereum miners, especially those that do it on a hobby basis will be drawn to using Robinhood as their custodian.
It could also potentially lead corporate customers to start mining Bitcoin or Ethereum. I am just waiting for the first announcement by a major corporation that it is doing this.
And why not? Ethereum is the second-largest crypto by market capitalization. Coinmarketcap says that Bitcoin has now crossed over $1 trillion in U.S. dollar market value. This is based on the number of Bitcoins outstanding. But Ethereum now has $221 billion in market capitalization, a little more than a fifth of the size of Bitcoin.
As people begin to realize that there is fewer and fewer Bitcoin to purchase, hence causing a short squeeze in the price, they may not be willing to use it as a transaction currency. They will tend to store or hoard it based on future price appreciation.
The same may not be true for Ethereum. It is designed to store transactions for more than just money transactions and includes blockchain scripting for stocks and property as well. So over time, it may end up having more appeal as a real currency and transaction store than Bitcoin.
Moreover, there is no hard cap on the total number of Ether coins that can be issued like there is with Bitcoin. This will make the currency more easily used in actual transactions than Bitcoin.
What To Do With Ethereum
I have theorized that in about seven or eight years one Ether will equal one Bitcoin in price. This assumes that Ethereum’s past outperformance will continue in the future.
You can easily buy both Bitcoin and Ethereum in many brokerage accounts now. Therefore, I suggest that if you are going to diversify into Bitcoin, you also buy Ethereum. These are the two largest and likely to continue to be the most liquid and high-performing cryptocurrencies.
Moreover, I suspect that FOMO (fear of missing out) may end up overtaking many corporate boards and CFOs. They will see the profits that corporations are making by owning Bitcoin and Ethereum in their treasury assets. They may not be able to afford being seen as the last to get on the train, so-to-speak, as avant-garde investors.
The fact that Ethereum has no hard supply cap and that it can cover more transactions than just currency transactions will eventually raise its appeal over Bitcoin. Look for Ethereum to continue to outperform Bitcoin over time.
On the date of publication, Mark R. Hake holds a long position in Ethereum and Bitcoin.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
