Bitcoin and Ethereum hold a significant share of the crypto market. While Bitcoin, as the first cryptocurrency, initiated the crypto trend, Ethereum competes closely with *BTC* in every aspect, including technological advancements and its working mechanism. Both Bitcoin and Ethereum possess investor-specific attributes that make them priorities in the market. Bitcoin and Ethereum together account for about 70% of the entire global crypto market cap. Bitcoin’s market cap is $1.1 trillion, which is much larger than Ethereum’s $285 billion market cap. However, Ethereum’s market cap is still more than three times bigger than any other cryptocurrency. This article provides an in-depth comparison of Bitcoin and Ethereum to offer a clearer picture on each investment aspect in 2024.
What is Bitcoin?
Bitcoin was launched in January 2009, based on a new idea outlined in a white paper by the mysterious Satoshi Nakamoto. It introduced Bitcoin as an online currency without a central authority, unlike government-issued currencies. Instead of physical coins, all transactions are recorded on a secure public ledger.
While Bitcoin wasn’t the first attempt at creating an online currency of this kind, it was the most successful. It has since become the foundation for almost all other cryptocurrencies.
Over time, the idea of a virtual, decentralized currency has gained acceptance among regulators and governments. In January, the SEC approved spot Bitcoin ETFs for trading, widening the exposure to big institutional investors.
Bitcoin is protected by cryptography, and transactions are verified through a process called mining. In mining, users compete to solve complex math puzzles using powerful computers to verify transactions. This method of verification is known as proof-of-work (PoW). Once a Bitcoin transaction is recorded on the public ledger, it is permanent and cannot be altered or tampered with in any way.
When a Bitcoin miner successfully adds a block of verified transactions to the blockchain, they earn a reward of newly created Bitcoins. Currently, that reward is 3.125 BTC per block, but it gets cut in half every time 210,000 blocks are added to the blockchain. Unlike traditional currencies, Bitcoin has a fixed limit of 21 million BTC that can never be exceeded. This cap on supply helps prevent inflation, and many Bitcoin investors believe these features will make it a valuable store of wealth over the long term.
What is Ethereum?
Ethereum is a blockchain platform designed to enable smart contracts and secure financial transactions. Its native cryptocurrency is called Ether.
Smart contracts are programs that allow decentralized applications (dApps) to run automatically on a blockchain when specific conditions are met.
The Ethereum network hosts various dApps, including those for gaming, gambling, socializing, and decentralized finance (DeFi). Most non-fungible tokens (NFTs) are also built on Ethereum.
Ethereum operates on a global network of thousands of computers, making it decentralized. In 2022, Ethereum switched from a power-hungry proof-of-work (PoW) system to a proof-of-stake (PoS) model. In PoS, validators are selected by an algorithm instead of miners solving puzzles. To become a validator, traders must stake some of their cryptocurrency as collateral. The more they stake, the higher their chances of being chosen to validate a block and earn rewards.
In July, the SEC finally approved spot Ethereum ETF trading.
Ether’s supply isn’t capped, but it’s managed through a process called burning. Each time a transaction occurs on Ethereum, users pay a transaction fee, or “gas.” A portion of this fee is burned, effectively reducing the total supply of ETH. This has sometimes made Ether deflationary, meaning more *ETH* is destroyed than created. However, after the Dencun upgrade in March 2024, which lowered fees and reduced burning, Ether is currently inflationary.
Key Features of Bitcoin
Bitcoin’s design has some key features that have made it popular as the first digital currency without a central authority.
Blockchain Technology: Bitcoin uses a system called blockchain, which is like a public record book that tracks all transactions. Every time someone makes a transaction, it’s added to this record, and everyone can see it. Because it’s shared across many computers, it’s very hard to change, making it secure. This system allows Bitcoin to work without needing a bank or any central authority, which helps prevent fraud.
Mining Process: Bitcoin works through a process called mining, where people (called miners) use their computers to solve difficult puzzles. When they solve these puzzles, they help verify transactions and add them to the blockchain. In return, they earn new bitcoins as a reward.
Transaction Speed and Scalability: Bitcoin is designed to process a group of transactions every 10 minutes, which limits how many transactions it can handle at once. This has led to discussions about how to make it faster and more efficient. To improve this, solutions like SegWit and the Lightning Network have been introduced.
Scalability Solutions: To handle more transactions more quickly, Bitcoin has introduced tools like the Lightning Network, which allows some transactions to happen outside the main blockchain, making them faster and easier to manage.
Key Features of Ethereum
Ethereum’s design adds several new features that make blockchain technology useful for more than just transactions.
Smart Contracts: One of Ethereum’s biggest innovations is smart contracts. These are self-operating contracts where the terms of the agreement are written into the code. They automatically enforce and carry out the terms without needing a middleman, allowing for secure and decentralized transactions.
Ethereum Virtual Machine (EVM): The EVM is the environment where smart contracts run on Ethereum. It’s like a virtual computer that’s built into each Ethereum node and can run contract code. The EVM allows developers to create decentralized applications (DApps) on the Ethereum platform, making it a powerful tool for building various blockchain-based projects.
Shift to Ethereum 2.0: Ethereum has been upgraded to Ethereum 2.0, moving from a Proof of Work (PoW) system to a Proof of Stake (PoS) system. This change is meant to solve issues like scalability, security, and sustainability. Ethereum 2.0 also introduces a technique called sharding, which increases the network’s capacity and lowers transaction costs, making the platform more efficient for a wider range of uses.
Difference Between Bitcoin and Ethereum
Bitcoin and Ethereum are both well-known cryptocurrencies that run on decentralized blockchain networks, but they have some key differences. Here’s how they differ:
Bitcoin uses a proof-of-work (PoW) system to verify transactions, which requires significant energy. On the other hand, Ethereum uses a more energy-efficient proof-of-stake (PoS) system.
Bitcoin is primarily designed to function as a digital currency, serving as an alternative to traditional currencies like the U.S. dollar, and can be used to buy goods and services. Ethereum, however, is mainly a platform for running smart contracts and decentralized applications (dApps), with Ether (ETH) being the native cryptocurrency used for transactions within the network.
Bitcoin has a limited supply of 21 million coins, while Ether’s supply is theoretically unlimited. Although Ether has been deflationary at times, its supply has been increasing since transaction fees were significantly lowered in March 2024.
The future value of Bitcoin will likely depend on its acceptance as a global currency and its use as a hedge against inflation and a store of value. In contrast, Ether’s value will likely be influenced by the growth and popularity of the Ethereum network, including the expansion of dApps and smart contracts.
Market Performance: Bitcoin Vs Ethereum
The market performance of Bitcoin and Ethereum offers an interesting look into how cryptocurrency markets work, with both experiencing big price changes over time due to various factors.
Historical Price Trends
Bitcoin: Since it started in 2009, Bitcoin’s value has skyrocketed, though not without major ups and downs. Its price stayed low until late 2013 when it saw its first big surge. The most notable peak was in late 2017 when Bitcoin’s price almost hit $20,000, followed by a steep drop.
In the years that followed, Bitcoin’s price continued to fluctuate, reaching record highs above $60,000 in 2021 and again in 2024, showing how volatile but generally upward its market performance has been.
Ethereum: Launched in 2015, Ethereum has also seen a lot of price swings. Its first major rise happened in 2017 during a broader cryptocurrency boom, peaking at around $1,400 in early 2018.
Like Bitcoin, Ethereum’s price has had big movements, especially with significant growth in 2020 and 2021, hitting new highs above $4,000, reflecting its increasing use, particularly in the booming decentralized finance (DeFi) sector.
Factors Influencing Price
Several key factors drive the prices of Bitcoin and Ethereum, including market demand, technological upgrades, and investor sentiment.
Market Demand: The demand for Bitcoin and Ethereum is shaped by their perceived value and usefulness. Bitcoin is often viewed as digital gold, a hedge against inflation, and a store of value, leading to higher demand during times of economic uncertainty. Ethereum’s demand is boosted by its role in the DeFi and NFT sectors, where it serves as the foundation for many applications and platforms.
Technological Upgrades: Advances and upgrades in technology also impact prices. For Bitcoin, improvements in scalability and security through updates like SegWit and the Lightning Network have positively influenced its price. Ethereum’s ongoing upgrade to Ethereum 2.0, which aims to improve scalability, efficiency, and sustainability by shifting to Proof of Stake, has been a major factor in its price trends.
Investor Sentiment: How investors feel about the market, influenced by news, regulatory changes, and the economy, greatly affects the prices of both cryptocurrencies. Positive news, such as big institutions adopting the currencies, endorsements from well-known figures, or favorable regulations, can drive prices up. On the other hand, negative news or uncertain regulations can lead to sharp price drops.
Is Ethereum Losing Ground to Bitcoin?
As we enter 2024, many crypto enthusiasts and investors are wondering: Should they sell Ethereum for Bitcoin? Has Bitcoin now surpassed Ethereum in long-term growth potential? With Bitcoin outperforming Ethereum by over 44% since the Ethereum Merge, the market is feeling the pressure. Let’s take a closer look at the current ETH vs. BTC situation, the potential risks, and what might be ahead for these two leading cryptocurrencies.
A key point is that Bitcoin has outperformed Ethereum since the Ethereum Merge nearly two years ago. Data from ultrasound.money shows Bitcoin has gained 44% more than Ethereum since then, raising concerns about Ethereum losing its edge. The main reason for this difference lies in their supply dynamics.
Bitcoin’s 2024 halving event cut the creation of new coins in half, making Bitcoin increasingly scarce. Meanwhile, Ethereum’s supply has grown, especially after its recent “Denon” upgrade. Although Ethereum has burned more ETH than it has issued over time (a deflationary effect), its supply has increased in the short term, which some believe has led to its recent underperformance.
Institutional Adoption Lacks in Ethereum ETF
Recent data shows that Ethereum’s supply has increased by nearly 1 million ETH in the past year, which is about 1% inflation. While this might seem worrying, it’s important to note that since the Ethereum Merge, the total ETH supply has actually decreased by 0.08%. This paints a mixed picture: short-term supply increases may be causing recent underperformance, but the long-term outlook remains deflationary due to the introduction of Ethereum Improvement Proposal (EIP) 1559.
Another factor is the impact of institutional investors and Ethereum ETFs. Ethereum ETFs have seen significant outflows, with over half a billion dollars leaving since their launch. Major institutions like Grayscale have also sold off a large amount of Ethereum, totaling $2.6 billion in outflows since the ETF launch, which has hurt ETH’s performance.
However, there’s some positive news: BlackRock, the world’s largest asset manager, has brought in about $1 billion in Ethereum ETF inflows, showing that there’s still strong interest from major players. While Grayscale is still selling, we might see a shift back to net buying once these sell-offs settle down.
Understanding the difference between short-term inflationary pressures and long-term deflationary trends is crucial to see why Ethereum has struggled recently but could still bounce back in 2024.
ETH-BTC Ratio Trends Lower
Ether has dropped 35% in the last 90 days, while Bitcoin has only fallen by 15% during the same period.
The ETH/BTC ratio has also decreased by about 22% over the past three months, hitting a multi-year low of 0.0405 recently. The drop in the ETH/BTC ratio shows that investors are favoring Bitcoin over Ether, leading to lower demand for Ether. For context, US spot Bitcoin ETFs have been more successful since the SEC approved them on January 10, compared to spot Ethereum ETFs.
According to onchain data provider Glassnode, these ETFs have had a bigger impact on Bitcoin’s price (8% of the spot volume) than on Ether’s price (only 1% of the spot volume).
“This indicates that interest in the Bitcoin ETF is significantly higher than in the Ethereum ETF.”
Bitcoin’s Dominance Didn’t Slow Down
Ether’s weak performance against Bitcoin has also been affected by Bitcoin’s growing dominance in the market.
In 2024, Bitcoin’s market dominance increased, hitting a 40-month high of 58% on August 5. This means Bitcoin is gaining strength compared to other cryptocurrencies, including Ether. Bitcoin dominance measures BTC’s market cap compared to the total crypto market and is often used by investors to understand market sentiment.
As Bitcoin’s dominance continues to rise, ETH’s value against Bitcoin is likely to keep dropping, suggesting that investors are more optimistic about Bitcoin and may be investing less in Ether.
Ethereum’s On-chain Metrics Turn Bearish
Tracking the number of active addresses on a network is a quick and reliable way to see how much the blockchain is being used and how much demand there is for the token.
Currently, the 30-day average of daily active addresses on the Ethereum network is 430K, which is a 7.7% drop from 90 days ago and much lower than the 686K seen in May 2021. This decrease in active addresses suggests that fewer people are using the Ethereum blockchain, leading to fewer Ether transactions. Looking at the number of unique active wallets (UAWs) on Ethereum provides a broader picture of how many decentralized apps (DApps) are being used on the network.
According to DAppRadar, active addresses for Ethereum DApps have fallen by 19% in the past 30 days. This decline is concerning, especially since other blockchains like Solana and Tron saw increases of 257% and 343% in UAWs over the same period. For ETH to rise above $2,400, the network needs to see more growth, more Ether transactions, and increased DApp usage.
Will Ethereum Dominate Bitcoin?
So, the big question is: Can Ethereum bounce back and outperform Bitcoin next year? Historically, Ethereum has done better than Bitcoin during bull markets, especially in the years after Bitcoin halving events. The idea is that Ethereum’s large ecosystem, which includes decentralized finance (DeFi), NFTs, and smart contracts, could fuel its growth. However, it’s worth noting that Ethereum has lagged behind Bitcoin for the past three years, which has some investors concerned.
Looking ahead, technical analysis shows that Ethereum is close to a key support level. If it holds, we might see a major price surge, following a pattern seen in previous cycles where Ethereum tests support before jumping in price. Some analysts believe Ethereum could experience another price spike before the end of Q4 2024, assuming favorable macroeconomic conditions.
Bold Predictions on Bitcoin and Ethereum
Looking ahead, many are making bold predictions about the future. The general belief is that Bitcoin could triple or even quadruple in this cycle, possibly reaching as high as $165,000. If Bitcoin hits these levels, Ethereum could be expected to reach about 8% of Bitcoin’s value, which would put ETH at around $13,200. However, breaking through the psychological barrier of $10,000 might be tough, meaning Ethereum would need a very strong market to go higher.
Why $13,000 for Ethereum Isn’t Unrealistic
While $13,000 for Ethereum might seem unlikely, history shows that ETH has seen huge gains during bull markets, especially after Bitcoin halvings. In the last bull run, Ethereum reached nearly 9% of Bitcoin’s value, and in earlier cycles, it hit as high as 15%. While those highs might not repeat, an 8% ETH-BTC ratio is definitely possible, especially given Ethereum’s ongoing importance in DeFi and NFTs.
Of course, the biggest risk is the unpredictable nature of crypto markets. While many analysts are optimistic about both Bitcoin and Ethereum, potential challenges like regulatory changes, economic shifts, or unexpected technological developments could impact their performance. Anyone investing in ETH or BTC should be aware of these risks.
How to Invest in Bitcoin and Ethereum?
Investors can easily buy Bitcoin and Ether on popular cryptocurrency exchanges like Coinbase, Gemini, and eToro. They can also purchase these cryptocurrencies through a brokerage account with platforms like Robinhood, Interactive Brokers, TradeStation, or even through PayPal or Venmo.
Both Bitcoin and Ether have futures contracts available for trading on the Chicago Mercantile Exchange. While futures trading can be complex, there are several Bitcoin and Ether ETFs that hold these futures contracts. Examples include the ProShares Bitcoin Strategy ETF (BITO), the VanEck Ethereum Strategy ETF (EFUT), and the ProShares Ether Strategy ETF (EETH).
As of January 2024, Bitcoin investors can also buy spot Bitcoin ETFs, which hold the actual cryptocurrency instead of futures contracts. The SEC has approved several spot Bitcoin ETFs for trading on major U.S. exchanges, including:
ARK 21Shares Bitcoin ETF (ARKB)
Bitwise Bitcoin ETF (BITB)
Fidelity Wise Origin Bitcoin Trust (FBTC)
Franklin Bitcoin ETF (EZBC)
Grayscale Bitcoin Trust (GBTC)
Hashdex Bitcoin ETF (DEFI)
Invesco Galaxy Bitcoin ETF (BTCO)
iShares Bitcoin Trust (IBIT)
For investment in Ethereum ETFs, here are some top funds:
Shares Ethereum Trust (ETHA)
Fidelity Ethereum ETF (FETH)
Bitwise Ethereum ETF (ETHW)
VanEck Ethereum ETF (ETHV)
Franklin Ethereum ETF (EZET)
Investment Perspectives: Bitcoin and Ethereum
Experts are generally optimistic about Bitcoin and Ethereum, although they recognize that these cryptocurrencies could experience price fluctuations due to changes in regulations, technological progress, and how widely they are adopted.
At Blockchain Reporter, we believe in the long-term potential of Bitcoin and Ethereum as investments. In its early days, Bitcoin was mainly used by a small group of tech enthusiasts. It was hard to get, had limited uses, and only a few merchants accepted it as payment. However, by 2023, Bitcoin has become much more mainstream. More businesses now accept Bitcoin as payment, and there are better tools, like user-friendly wallets and exchanges, making it easier for the average person to use.
Institutional interest in Bitcoin has also grown. Hedge funds, asset management firms, and endowments are starting to see Bitcoin as a valuable asset that can help diversify their portfolios and protect against inflation.
We are also bullish on decentralized software protocols, which offer an alternative to current intermediaries. Among these, Ethereum stands out as a likely leader in capturing significant economic value. We believe that by 2030, Ethereum could become a major force in digital assets, with its token potentially reaching a value of $11.8k.
FAQ
What are Bitcoin and Ethereum?
Bitcoin is the first decentralized cryptocurrency, created in 2009, often referred to as “digital gold.” It primarily functions as a store of value and medium of exchange.
Ethereum, launched in 2015, is a decentralized platform that enables smart contracts and decentralized applications (dApps), with Ether (ETH) as its native cryptocurrency.
What are the key differences between Bitcoin and Ethereum?
Bitcoin is mainly a digital currency, focusing on being a store of value and transactional utility. It operates on a proof-of-work (PoW) consensus.
Ethereum supports smart contracts and dApps, allowing for more diverse blockchain uses. Ethereum shifted from PoW to a proof-of-stake (PoS) model in 2022 to improve energy efficiency and scalability.
Which is more scalable: Bitcoin or Ethereum?
Ethereum is more scalable due to its Ethereum 2.0 upgrade and the PoS model, which supports faster transaction speeds and lower fees.
Bitcoin has scalability solutions like the Lightning Network, but its transaction capacity remains lower compared to Ethereum.
What is Bitcoin’s market cap compared to Ethereum’s?
Bitcoin’s market cap is around $1.1 trillion, making it the largest cryptocurrency by far.
Ethereum’s market cap is approximately $285 billion, still significant but much smaller than Bitcoin.
Why is Bitcoin considered a better store of value?
Bitcoin has a fixed supply of 21 million coins, making it deflationary by design. This scarcity is often viewed as a hedge against inflation, similar to gold.
How does Ethereum’s supply work?
Ethereum’s supply is uncapped but is managed through a burning mechanism that reduces supply over time, particularly during high network activity.
What are the risks of investing in Bitcoin vs Ethereum?
Bitcoin risks include regulatory concerns and scalability challenges.
Ethereum risks involve competition from other blockchain platforms and potential vulnerabilities in its PoS model.
Which coin has better long-term growth potential?
Bitcoin is likely to maintain its position as the leading store of value, while Ethereum offers more utility through its smart contracts and dApps, potentially offering higher long-term growth due to its versatility.
How can I invest in Bitcoin or Ethereum?
You can purchase Bitcoin and Ethereum through popular cryptocurrency exchanges like Coinbase, Binance, or Robinhood. There are also Bitcoin and Ethereum ETFs available on major stock exchanges.
What are the key price predictions for Bitcoin and Ethereum in 2024?
Bitcoin could reach as high as $165,000 according to some analysts.
Ethereum is projected to potentially rise to $13,000, depending on market conditions and the continued growth of the Ethereum network.
