Bitcoin and Ethereum are the two largest cryptocurrencies by market capitalization – they accounted for 40.7% and 20.9% of total crypto market capitalization respectively as of August 3, 2022. For investors considering Bitcoin or Ethereum from an investment perspective, it is an important question: will Ethereum pass Bitcoin.
Both Bitcoin and Ethereum are cryptocurrencies based on blockchain technology. However Bitcoin is essentially a digital currency. Ethereum, on the other hand, is also a ledger technology that companies are using to build new programs
Ethereum offers a trustworthy general-purpose computing platform which is decentralized and publicly available. Businesses can use the feature of Ethereum network that allows building and running of their own programs. This important feature is implemented by native smart contract functionality incorporated into the Ethereum network. Smart contracts are computer programs that automate actions when
predetermined criteria are met. They run on the Ethereum Virtual Machine (EVM) and are a key feature of the Ethereum blockchain.
So businesses can use the Ethereum decentralized network to collaborate, share and protect data by automating processes. And this puts Ethereum apart from Bitcoin which is essentially just a digital asset.
Therefore many investors bet that Ethereum will overtake Bitcoin as the dominant coin in the market as Ethereum adoption by businesses rises. A chart below reflects the market capitalization of various crypto currencies.
Chart 1: Crypto Market Capitalization
It is important to understand what is Bitcoin before shaping your crypto trading strategy since it is considered as long-term wealth storage by holders and gives the tone to the market overall. A visual inspection of the chart reveals that Bitcoin is the most popular crypto asset. And the answer to the question – Bitcoin or Ethereum (at least for investment purpose and from liquidity perspective) appears to be Bitcoin currently – it accounts for over 40% of market capitalization while Etherum only for over 20%.
At the same time the answer to the question – will Ethereum pass Bitcoin – is a qualified “yes”. While the market cap of Ehereum has varied in the 10%-20% range in the past years, the dynamics in the last couple of months is positive. The Ethereum market cap has risen from 14.8% on June 1 to 20.7% on August 1. Bitcoin market cap fell from 43.8% to 40.7% in the same period. Continuation of this dynamics will help Etherum catch up with Bitcoin in terms of market cap and then surpass it in the long-term perspective.
Bitcoin (BTC) Price Analysis For The Rest of 2022
The Bitcoin price analysis on BTCUSD daily chart below indicates Bitcoin attempted a rebound in first four months of 2022 but then resumed retreating that started after it hit an all-time high in November 2021.
Chart 2: BTCUSD, Daily
Bitcoin is in a bear flag in a downtrend currently, and most likely it will break out down from the flag and the price will be lower by the end of 2022.
Will Ethereum Pass Bitcoin? Ethereum Price Analysis
The Ethereum price analysis on ETHUSD daily chart below indicates similar dynamics: Ethereum attempted a rebound in first four months of 2022 but then resumed retreating that started after it hit an all-time high in November 2021.
Chart 3: ETHUSD, Daily
Ethereum tested 61.8 resistance level of Fibonacci extension and retraced lower. Most likely the price will be lower by the end of 2022.
What About Buying Ethereum or Bitcoin in 2023
The chart below displaying percentage price change for Bitcoin and Ethereum over a four year period of August 2018-August 2022 will help answer the question – should I invest in Ethereum or Bitcoin?
Chart 4: ETHUSD & BTCUSD Percentage Price Change
A close inspection of the percentage price change chart on weekly timeframe reveals that Bitcoin and Ethereum move mostly together: when Bitcoin rises Ethereum rises too, and when Bitcoin falls Ethereum falls too.
And that is not surprising, as the top two cryptocurrencies account for about two third of total crypto market capitalization and are subject to same market risks which explains high correlation between their prices.
At the same time another feature stands out: etheruem price changes are bigger in the magnitude generally comparted with the Bitcoin price changes. Ethereum percentage price increase is generally bigger than the Bitcoin percentage price increase in the same period, and Ethereum percentage price decrease is generally bigger than the Bitcoin percentage price decrease in the same period. In other words Ethereum price is more volatile compared to Bitcoin.
So from trading perspective the answer to the question – Bitcoin or Ethereum – is Ethereum: a trader stands to profit more from bigger changes in Etherum price.
And when one considers Bitcoin or Ethereum long-term, Ethereum provides better investment alternative taking into account rising acceptance of Ethereum network by businesses.
The Bitcoin price analysis and etherum price analysis help us answer the question- is Ethereum better than Bitcoin – from different perspectives. From trading perspective Ethereum appears to be more volatile – its percentage price changes are much bigger than percentage price changes in Bitcoin price over same time periods.
So from trading perspective higher profits can be made from Ethereum trading compared with Bitcoin trading. Of course it should be kept in mind that together with opportunity for higher profits higher volatility entails also higher risks for losses. Therefore caution is advised to minimize possible losses due to higher volatility.
The answer to questions – will Ethereum pass Bitcoin and will Ethereum go up like Bitcoin – is yes, most likely. Ethereum network allows businesses to build and run their programs through smart contract capability inherent to it.
Businesses can use the Ethereum network to cooperate, share data and create marketplaces. There are business association that promote adoption and development of Ethereum network.
The Enterprise Ethereum Alliance (EEA) is the biggest and well known organization comprising Fortune 500 enterprises and startups including J.P. Morgan, Microsoft, Banco Santander, Intel, BNY Mellon, CME Group and several others. They are leading efforts to drive industry adoption and develop new business opportunities.
The adoption of Etherum will widen as more businesses see new opportunities and benefits for improved efficiency from using Ethereum technology in their daily business operations. Therefore Etherum can pass Bitcoin.
And from long-term perspective the answer to question – will Ethereum go up like Bitcoin – is yes, most likely, for the above mentioned reasons.
The one advantage Bitcoin has over other crypto currencies is its higher liquidity. At the same time Ethereum has the second largest market capitalization and its liquidity will rise in long term perspective.