Buy More Ethereum for the Same Money, and Watch It Overtake Bitcoin

Ethereum (CCC:ETH-USD) is up 87.7% year-t0-date (YTD) to $1,391.08, as of Jan. 30. But Bitcoin is up 19.6% YTD to $34,624, as of Jan. 30.

A stack of ether or ethereum coins on a gold background.
Source: Shutterstock

Moreover, in the last six months, ETH is up 300% whereas Bitcoin is up 205%. So ETH is cheaper in terms of absolute dollars and has had superior performance.

The outperformance by Ethereum holds up over the past two years. For example, ETH was at $109.30, giving it a two-year run of 11.72 times. However, Bitcoin was at $3,468.43 and so it is up about nine times.

So in each of these near-term and long-term time segments, Ethereum has done better than Bitcoin. Moreover, it has another chief advantage: You can buy more of them for the same amount of dollars.

This matters a good deal. Over time ETH might end up catching up to Bitcoin in absolute dollars. Therefore those that bought ETH would end up having a greater increase in wealth.

Let’s see if we can see how long that would take.

A Look at ETH in the Future

1-30-21 - Ethereum vs. Bitcoin at 33.3% growth rate vs. 100% for ETH
Click to Enlarge
Source: Mark R. Hake, CFA

Over the next decade or so, Ethereum has a good chance of catching up to the price of Bitcoin. You can see this in the chart at the right.

For example, let’s assume that Bitcoin rises at least 33.3% annually over the next eight years. Let’s also say that on average Ethereum rises at least three times faster than Bitcoin, as it has done over the last two years.

Since the Ethereum is compounding faster, the Ethereum price will catch up to the Bitcoin price in a fewer than eight years (see the chart below).

By my projections, Ethereum, which started out at $1,391 will hit $355,954, and Bitcoin, which started out at $34,624 ends up at 345,780.

Now, just to be conservative, let’s assume that Bitcoin grows faster at 50% annually and Ethereum grows at just 100% each year. This means that Ethereum is only growing twice as fast, not three times as fast as in the chart.

1-30-21 - Ethereum vs. Bitcoin with BTC at 50% growth rate vs. ETH 100%
Click to Enlarge
Source: Mark R. Hake, CFA

In this scenario, Ethereum catches up to Bitcoin, but this time it takes a little more than 11 years.

For example, in year 11, Bitcoin is at $2.99 million, whereas Ethereum reaches $2.88 million. In a few months after 11 years, then Ethereum will overtake Bitcoin.

What to Do With Ethereum

Here is what this means from a practical standpoint. You can probably afford one full Ethereum for $1,394 or so today. However, for the same amount of money $1,394) you can only buy 0.04026 (i.e., 4%) of 1 Bitcoin.

But sometime within the next eight to 11 years or so, if past trends stay the same, your one full Ethereum will be worth as much as 4% of one Bitcoin bought at the same time.

I do think that there will be a slowing of that growth rate, but maybe not as much as people expect.

In other words, you will likely be much better off, given past trends, buying Ethereum rather than Bitcoin.

On the date of publication, Mark R. Hake did not hold a long or short position (either directly or indirectly) in any of the stocks in this article.

Mark Hake writes about personal finance on and runs the Total Yield Value Guide which you can review here.

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