Ethereum (CCC:ETH-USD) will likely be a better long-term cryptocurrency investment than Bitcoin (CCC:BTC-USD). One really simple reason is that it has been significantly outperforming Bitcoin. Moreover, it is likely to continue to do so.
In the last month alone, ETH is up 60% from $1,691 to $2,730, as of April 28. By contrast, BTC is down $1,059 from $55,750 to $54,851, or about -2%. That kind of discrepancy in performance is pretty significant. But it has been going on for a good while.
For example, year-to-date ETH is up by $1,993 from $737 where it was on Dec. 31. That represents a gain so far this year, of 273%. Bitcoin, however, is up by $26,477 from $29,374 to $55,851, as of April 28. That is a gain of 87%. In other words, ETH has outperformed by almost 3 times, just since the beginning of the year.
This is also evident in the last year. Ethereum was at $198.47 on April 28 last year. That means it’s up by $2,531.53 or 10 times over the past year. By contrast, Bitcoin is up by $48,044 from $7,807, or 600%. Again, Ethereum has outperformed by nearly twice – ten times vs. six times gains in the last year.
Ethereum’s Other Advantages
Both Bitcoin and Ethereum use blockchain distributed ledger technology. Although they both have a proof-of-work system to reward validators of blockchains, Ethereum’s focus is different.
For example, Ethereum’s blockchain can be used to power tamper-proof decentralized financial contracts and applications. This smart contract tracking ability is one of the unique aspects that sets Ethereum apart. Its primary purpose is to spread the use of its decentralized application program and to promote its smart contract abilities.
Moreover, Ethereum is the blockchain most widely used in non-fungible tokens (NFTs). It allows programmers to pick up digital artifact information used in the creation and sale of NFTs. NFTs have been rising in popularity as a means of providing for the sale of digital assets.
For example, on March 11, the New York Times reported that, during a Christie’s auction, a JPG file sold for $69.3 million. This was a new high for an artwork that exists only digitally.
Ethereum also does not have a supply cap like Bitcoin, which is limited to just 21 million Bitcoin. The Wall Street Journal says Ethereum’s supply is determined by members of Ethereum’s community.
In addition, Ethereum is now being slowly upgraded to Ethereum 2.0. This uses a proof-of-stake system to validate blockchain transactions. It will not require mining, as used in the Bitcoin proof-of-work system.
What To Do With Ethereum
Over two months ago I predicted that ETH would continue to outperform Bitcoin. I postulated that if Ethereum rises three times as fast as Bitcoin, it would take eight years or less for Ethereum to catch up to the same price as Bitcoin.
But that was assuming that Bitcoin rises just 30% per year on average and Ethereum rises 120% per year. And the starting point at that time was $34,624. However, I believe that Ethereum will increase at least 200% per year and Bitcoin will rise 50%, starting at $54,891 (BTC) and $2,636 (ETH).
The table on the right shows the result of this trajectory. Sometime between year five and six, Ethereum will catch up to Bitcoin. The price of both will between $265,00 and $295,000 that year.
In other words, I now believe that Ethereum’s price rise acceleration will shorten the period when a parity between ETH and BTC will occur.
The implication here is pretty clear. Buy Ethereum instead of Bitcoin, if you believe this outperformance will continue. Of course, there is no guarantee that it will.
For example, it may be that ETH’s price rise will slow down or deaccelerate as its price becomes more expensive. In other words, as people can no longer easily afford one ETH, as they can’t easily do now with Bitcoin, its price gains could slow.
On the date of publication, Mark R. Hake held a long position in Bitcoin and Ethereum.