Ethereum Compares Very Well Against Bitcoin Moving Forward

Even though Ethereum (CCC:ETH-USD) has dropped a precipitous 35% from its recent highs, there is reason to be optimistic. 

Another stylized version of the Ethereum logo
Source: shutterstock

The optimism stems from the fact that its main rival is flagging much more. Bitcoin (CCC:BTC-USD) has shed about 43% from its high this year during this recent price correction. Not only is there room from optimism about Ethereum’s prospects on that front, but also in terms of mechanism. 

Bitcoin has faced increasing questioning regarding its environmental friendliness as it relates to mining. Ethereum’s recent switch to a proof of stake mechanism should only serve to distance it from Bitcoin and its proof of work mechanism. 

That isn’t to say that ETH has pulled ahead of Bitcoin, or that adoption of proof of stake mechanism will be the defining factor. Bitcoin still far outstrips Ethereum from all important metric of market capitalization. In fact, Bitcoin carries more than double the market cap of Ethereum, at $677 billion currently. 

But there are a lot of reasons to believe that Ethereum will rebound quicker and may someday overtake Bitcoin in valuation. 

Ethereum Is Growing Faster 

One thing is clear, Ethereum has grown much faster than Bitcoin has in 2021. While Bitcoin is up 24%, Ethereum has risen by more than 250%. Price appreciation is probably the most important consideration for investors. After all, investors are looking for returns more than anything else. 

However, there are many other metrics investors can look at in understanding when Ethereum might supplant Bitcoin as the most valuable cryptocurrency. One important one is market share which indicates that Ethereum is closing the gap on Bitcoin.

On June 5, Bitcoin accounted for 41.5% of crypto market share while Ethereum accounted for 18.8%. That doesn’t sound great, but it is clear that Ethereum is gaining while Bitcoin is not. 

That’s because on Jan. 11, Bitcoin accounted for 76.4% of market share, about 35% more than it currently does. On the other hand, Ethereum has gained market share in the same period. On Jan. 11 it accounted for 14.4% of market share. Since then, it has increased to 18.8% of market share. 

Transaction Value and Fees

There are a few reasons why transaction value and transaction fees are important in the world of crypto. Transaction value really relates to how much utility users of a network can derive from it economically. Transaction fees are pretty straightforward. Users simply want to pay less to use their money. 

On both fronts Ethereum takes the cake when compared with Bitcoin. The daily value transacted through ETH-USD was $10.85 billion over the previous 24 hours when I wrote this article. For Bitcoin, that figure was a significantly lower $6.98 billion during the same period. This makes sense given Ethereum’s utility. 

The average transaction fee for Ethereum was $5.38. It was more than a dollar higher for Bitcoin, at $6.56. As more and more crypto investors become interested in efficiencies figures like these are going to become increasingly important. The more important point is that Ethereum costs less, but derives more in total transaction value.

I’d assert that after this current correction abates that Ethereum will rebound much quicker than Bitcoin does. When investors factor in the idea that Ethereum has arguably made the better choice in moving to proof of stake, it looks to be inching ever closer toward eclipsing Bitcoin.

The idea that Ethereum will usurp Bitcoin’s throne in crypto is starting to feel much more real the more markets understand the full landscape. The latest slide has taken crypto prices down at large. But there’s a lot of reasons to believe Ethereum can gain lots of ground on Bitcoin after this.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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