An Easy Method for Comparing Ethereum to Bitcoin

Ethereum (CCC:ETH-USD) is inextricably associated with Bitcoin (CCC:BTC-USD). Right now, Bitcoin is clearly winning the battle for cryptocurrency dominance. Bitcoin’s price even eclipsed $57,000 recently. Bitcoin has come down some of late, yet its market capitalization still eclipses $900 billion. 

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

Ethereum, with a more modest market cap of about $185 billion, is the other, often discussed cryptocurrency. It’s hard to find conversation about one, without at least mention of the other. 

Both Bitcoin and Ethereum look extremely promising moving into the future. Bitcoin has risen so much.  Should investors look to Ethereum now? And how can investors judge the two leading cryptos against one another?

Focus on Ethereum

I would say it is time for investors to shift more focus on Ethereum. Firstly, Ethereum may very well possess more ability to grow than Bitcoin. At its roughly $1,700 price tag, ETH tokens simply look much more appealing than $50,000 BTC tokens. 

Then there’s the matter of growth. Ethereum has risen 571% in the previous year’s time. Bitcoin, a slightly lower, though still stellar 438%. Investors would be over the moon with either return, but Ethereum’s return has been superior. 

Cryptocurrency remains opaque. The more I read about it, the less I feel I understand. It is much easier to compare and contrast stocks than cryptos. The stock market is mature, the cryptocurrency market is not.

That’s where I’d like to steer this conversation. Investors want to know when Ethereum may overtake Bitcoin. Turns out there’s a handy index.

The Flippening

The flippening is an index of eight metrics which attempts to quantify how close Ethereum is to eclipsing Bitcoin as the dominant cryptocurrency pairing.

The eight metrics the index tracks include market cap, transaction count, trading volume, node count, active addresses, transaction volume, total transaction fees and Google search interest. The result is a number that reconciles when the two cryptos will flip in terms of dominance. The number as I write this is 65.6%. That indicates that Ethereum is roughly two-thirds of the way to flipping Bitcoin. 

According to the site, Ethereum was recently close to three-quarters of the way toward flipping Bitcoin in early February. That’s because on Feb. 8 the index reached 72.35%.

The Flip Is Underway

In a few of the metrics including transaction count, node count, and total transaction fees, Ethereum already eclipses Bitcoin. 

The two metrics that really hold a lot of sway in my mind are market cap and total transaction fees. As mentioned, Ethereum is now making more in total transaction fees than Bitcoin is according to the site. That’s an important aspect in judging the value of a given cryptocurrency. It’s usually somewhat difficult to gauge cryptocurrencies and apply quantifiable metrics to them. 

Ethereum has a distinct advantage over Bitcoin from a transactional fees perspective. That should begin to alert potential investors to Ethereum’s potential to shake up the status quo. 

However, if we look at the comparison between the two using stocks as an analogy, market cap still holds a lot of sway. In the stock markets, larger market cap generally indicates a bigger, stronger company.

Bitcoin remains far and away the leader in that regard. As I already mentioned at the beginning of this article, Bitcoin has a market capitalization of about $900 billion to Ethereum’s $185 billion. The point here is that many pundits will be remiss to call Ethereum the No. 1 crypto until its market cap is greater than Bitcoin’s. 

But for readers who want to have a quick reference, at least the flipping can provide some reference in the often opaque cryptocurrency markets. 

Corporate Treasuries

Corporate treasuries have begun to consider Bitcoin in an institutional grade perspective.

Tesla recently added a $1.5 billion BTC position to its treasury. There are a notable number of other companies which have done the same.

This is an interesting development in the evolution of Bitcoin. And it begs the question of when a corporation might do the same with Ethereum. I cannot find any news to suggest that it may happen soon, but perhaps it is another factor to consider for ETH investors. 

Takeaway

I am not sold on cryptocurrencies yet. Their value and potential to provide massive returns is proven. Ethereum may be the next to do what Bitcoin has recently done. I’d argue that some of the metrics discussed above at least give readers a way to rationalize a purchase moving forward.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.


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