Why Ethereum Will Likely Continue to Outperform Bitcoin Next Year


Bitcoin (CCC:BTC-USD) has risen 76% year-to-date, according to Google Finance, and stood at $51,757 as of Dec. 27. But Ethereum (CCC:ETH-USD) is up 461.6% in the same timeframe, based on Google Finance. Moreover, there is good reason to believe that ETH crypto will continue to outperform Bitcoin over the next year.

Concept coins for Ethereum (ETH) and Ethereum Classic (ETC).
Source: Shutterstock

However, it’s not as though there won’t be resistance.

Once a crypto starts to trade in a range it becomes difficult for traders to envision trading outside that range. As a result, the crypto trading can stay in a range and “resistance” builds up.

For example, one crypto-analyst quoted by The Daily Hodl, Pentoshi, who has 434,900 Twitter followers, recently said that Ethereum is stuck in a range.

He said that “the area between $4,400 and $4,500 is a critical level for the leading smart contract platform.” He didn’t say which smart contract platform he was referring to.

However, once the price moves over that he said that it would push to a new all-time high. That is the definition of what it means to be stuck in a trading range. As of Dec. 27, Ethereum was trading at $4,082 per ETH crypto token.

Where Things Stand With Ethereum

Recently the Ethereum Foundation, which promotes the development of Ethereum and upgrades the blockchain, made a major announcement. According to Cryptoslate magazine, it said that the blockchain is starting to run a new testnet called Kintsugi.

This testnet is a set of blockchain protocols that facilitate Ethereum’s transition from a proof of work network to a proof of stake network. Over time Ethereum plans on moving to this type of method to validate transactions as opposed to Ether mining to validate transactions. This is known as Ethereum 2.o.

The advantage of Ethereum 2.0 is that it will promote faster, cheaper, and less energy-consuming transactions. And people certainly want Ethereum transactions to process faster and much cheaper.

This issue right now is how fast this new testnet will catch on. Developers and new apps need to be involved in the promotion of Ethereum 2.0 through this testnet protocol. Once there are enough developers, nodes and apps using the new test, the mainnet Ethereum blockchain will “merge” on a single day. The problem is no one knows yet when this will happen.

The Cryptoslate article also points out that there is another benefit for the new testnet: It will allow users “to secure the network by locking ETH into the protocol, also known as staking. The staking will also enable users to earn additional crypto rewards by validating other transactions on the network.”

Where This Leaves Investors in ETH Crypto

As I wrote several weeks ago, there has been a huge debate in the market on the viability of Ethereum given how high its transaction or “gas” fees keep rising. One analyst even referred to it as an “existential crisis.”

Others, especially those want to promote Ethereum, argue that this is simply the cost of doing business. In their minds, the higher gas fees reflect the popularity and success of Ethereum, according to a recent article in Decrypt magazine.

The article quotes a co-founder of Ethereum that the higher fees reflect the ongoing demand for Ethereum. It shows that given Ethereum’s uses with NFTs (non-fungible tokens), smart contracts and other Dapp (decentralized apps).

As a result, it’s possible that even with the introduction of Ethereum 2.0 with its proof of stake validation method, the demand for ETH crypto could rise. That will help its price rise substantially more than Bitcoin over the coming year.

But it could also mean that Ether transaction costs don’t fall from their high costs at present. That may be a trade-off that investors in Ethereum will have to live with – a higher price with higher transaction costs.

On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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

Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.

Article printed from InvestorPlace Media, https://investorplace.com/2021/12/ethereum-why-eth-could-outperform-bitcoin/.

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