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3 Reasons why Ether will Continue to Overtake Bitcoin

Posted on by pilogarobic

Another series of new highs and correction

Ether overtook Bitcoin throughout 2021

The first reason: the platform

The second reason: energy efficiency

The third reason: fruitfulness

My career in the field of markets began in 1977, when I got a summer job at Phillipp Brothers, which at that time was the world’s leading commodity trader. I found myself in this business when I was still a teenager, at the most opportune moment: commodity prices were then updating record highs in the face of inflationary pressures engulfing the global economy. The profits earned by the oil and precious metals departments were enough to acquire the Salomon Brothers boutique specializing in bond trading in 1980. Thus, Phillipp Brothers began to expand into financial markets.

Then, in the 80s, the situation changed, and commodity prices began to fall, while there was a rally in the financial markets. Although it was Philipp Brothers that acquired Salomon, and not vice versa, the axis of influence in the leadership shifted, and as a result, Salomon representatives began to dominate. Both companies have long since sunk into oblivion. Each of them earned thanks to incredible bull markets for the asset classes in which they specialized.

During my 40-year career, I have seen a lot of “bullish” and “bearish” markets, but they all pale in comparison with what is happening now with cryptocurrencies. This “mega-rich” asset class became widely known in 2010 and incorporated various financial market instruments, which are becoming more and more popular every day.

Regardless of the personal attitude to cryptocurrencies, their dizzying rise cannot but cause admiration. And since traders and speculators love volatility, because it creates a myriad of opportunities, the cryptocurrency market has become a “garden of eden” for them.

The leaders among digital currencies are bitcoin and ether, but they are very different from each other.

Although bitcoin is still in the lead (its market capitalization is almost twice the capitalization of ether), the second leading cryptocurrency, and there are more than 15,550 tokens in this asset class, is growing faster than the leader, and it is possible that in the end it will be at the top.

Another series of new highs and correction

At the auction on November 10, bitcoin and ether reached the last record highs.

Bitcon futures – weekly Timeframe Bitcon futures – weekly timeframe

The weekly timeframe reflects the growth of the nearest bitcoin futures to a maximum of $69,355.

Bitcoin Futures – Daily Timeframe Bitcoin Futures – Daily timeframe

The daily timeframe reflects the “bearish” pattern of the “key reversal”, formed on November 10, when bitcoin reached a new record high, but ended the session below the minimum of the previous day. If we focus on the last minimum of $46,650, recorded on December 13, the price of bitcoin has adjusted by 32.7%.

Ether futures – weekly timeframe Ether futures – weekly timeframe

The weekly timeframe for ether futures shows the growth of the cryptocurrency to a new high of $4,902.75 at the auction on November 10.

Futures on ether – daily timeframe Futures on ether – daily timeframe

On the daily timeframe, the same “bearish” pattern of “key reversal” is clearly visible, after the formation of which on November 10, the ether fell to the level of $3,749.50 by December 13 (the last minimum). Since the maximum on November 10, the price of ether has decreased by 23.5%. Although the dynamics of the ether cannot be called positive, it nevertheless proved to be better than bitcoin during this correction, which began in both cases with a technical reversal.

Ether overtook Bitcoin throughout 2021.

Despite the “bearish” dynamics of recent weeks, bitcoin and ether have shown impressive growth in 2021.

 

BTC/USD – monthly timeframe BTC/USD – monthly timeframe

Source: Barchart

 

The chart above shows that the BTC/USD pair ended 2020 at a new record high of $28,986.74. Based on the level of $47,367.01 from December 13, the pair grew by 63.4%.

 

ETH/USD — monthly timeframe/USD — monthly timeframe

Source: Barchart

 

Meanwhile, Ether ended 2020 at $738,912 to the dollar. By December 13, 2021, the price had increased more than fivefold, to $3,820,425.

 

Thus, ether overtook bitcoin both during 2021 and as part of the recent collapse that followed the achievement of new record highs for both cryptocurrencies. These factors speak in favor of the greater attractiveness of ether compared to bitcoin, and it is possible that the second leading cryptocurrency will continue to reduce the gap from the leader.

 

The first reason: the platform

Bitcoin can be called the progenitor of cryptocurrencies as an asset class. Although it is not clear which was born first — bitcoin or blockchain, both concepts will forever be associated with Satoshi Nakamoto’s white paper published in 2008, entitled “Bitcoin: a Peer-to-peer electronic Monetary System”. It is thanks to this work, which describes the “initial block of bitcoin”, that cryptocurrencies were born. What Nakamoto came up with earlier — bitcoin or blockchain — we may never know, as in the classic chicken-and-egg dilemma.

 

Meanwhile, bitcoin is only a cryptocurrency. Ethereum is an entire platform whose native token is ether. Bitcoin is mainly a means of preserving value and exchange. Ethereum is a general purpose blockchain. Many of the other cryptocurrencies use ethereum or derivatives of the Ethereum protocol, as they provide faster transaction processing than the bitcoin blockchain.

 

The second reason: energy efficiency

Mining cryptocurrencies requires huge energy costs. Any real estate agent knows that the price of an object is largely determined by its location. In the crypto space, energy consumption has become such a key criterion, given that the world is facing the problem of climate change, not to mention fluctuations in electricity prices themselves.

 

The energy consumption of bitcoin reaches 707 kW, while for ether this figure is 62.56 kW. Advanced processors serve complex algorithms in the bitcoin blockchain. Ethereum 2.0 requires much less electricity, which makes ether a more environmentally friendly cryptocurrency.

 

In addition, Ethereum is based on the proof of stake (PoS) model, which distributes mining power depending on the size of the stake owned by the miner. Bitcoin is based on the proof of work (PoW) model and requires huge amounts of electricity to maintain computing power.

 

The third reason: fruitfulness

Yes, it all started with bitcoin, but it must constantly prove its status as the most effective and valuable cryptocurrency in order to maintain leadership. According to CoinMarketCap, the market capitalization of bitcoin as of December 13 reached $ 900 billion, while the capitalization of ether was slightly more than half of this figure, namely $ 456 billion. However, in 2021, the market capitalization of ether grew faster than the capitalization of bitcoin.

 

Bitcoin is undoubtedly the progenitor of cryptocurrencies, but the ether turned out to be much more fertile. Some of the most successful cryptocurrencies to date are associated with the Ethereum protocol, including Litecoin (LTC), Cardano (ADA), Polkadot (DOT), Bitcoin Cash (BCH), Stellar (XLM), Dogecoin (DOGE), Binance Coin (BNB) and many others.

 

In 2022, ether, it seems to me, will continue to outpace bitcoin. It runs on a faster and more flexible protocol, and the PoS model requires much less electricity than the PoW model.