Bitcoin, the largest cryptocurrency by market capitalisation and the first to be launched successfully, realised the dream of other developers that attempted to give wings to digital currency projects. Created by an individual or group of devs known as Satoshi Nakamoto, it is today among the most popular investment options for those who believe in a revival of the cryptocurrency market and economic stabilisation happening soon.
Ethereum followed in Bitcoin’s footprints and ranks second after the pioneer in cryptocurrency by market cap, making it a safe long-term investment choice. While Bitcoin is designed as a store of value and cryptocurrency, Ethereum’s use cases stretch further, being created as a complex network for decentralised apps and smart contracts.
These use cases won’t let the token die and show that the potential of cryptocurrencies and their technology stretches beyond taking advantage of price fluctuations to make a profit.
However, it’s not these features but rather the media exposure it gets, demand and supply, worldwide economic state and other events that impact ETH price. When pondering whether to invest in cryptocurrency, it’s crucial to be aware of the market volatility, even if this is the catalyst for big overnight profits.
Similarly, when deciding between Bitcoin and Ethereum, the following aspects should be considered.
Why is Bitcoin popular?
Bitcoin currently accounts for around 44% of the global cryptocurrency market capital. Meanwhile, stablecoins’ market capital has approximately 11% share of it. As the de facto leader, only Ethereum comes close to it, even if it’s miles away. As of January 2022, the dollar BTC value was around £359 billion, growing to almost £438 billion at the moment of writing, with a total cryptocurrency market capital of close to £987 billion.
These facts are noteworthy because, generally, the higher the market capital of a digital currency, the more powerful and popular it is considered to be.
However, even though this is seen as the best indicator of relevancy, there’s often criticism surrounding it because the market cap is not a guarantee of a cryptocurrency’s long-term popularity, meaning that even though it helps to gain a clearer image of your potential investment, there are more factors involved to consider when venturing in such volatile markets.
How does Bitcoin work?
As a digital currency that uses cryptography and blockchain-powered technology, it’s based on writing and deciphering code to process transactions. It functions like a medium of exchange where cryptography secures transactions and keeps control of the number of additional units of currency created.
The supply limit is a unique feature implemented by Bitcoin but adapted by other cryptocurrencies, too. Regardless of Bitcoin’s evolution, there can’t be more than 21 million tokens in existence.
Similarly, Binance coin (BNB), the coin issued by Binance exchange and running on Ethereum network, can’t exceed a total of 20 million tokens. Bitcoin’s creator stipulated this number to control the supply and, consequently, the price fluctuations. One way to achieve this goal is by gradually releasing tokens instead of all at once.
The concept of halving was developed to ensure the progressive flow of coins, which means that the number of tokens entering circulation is cut by half every three years and nine months. What are the repercussions?
When Bitcoin reaches that limit, mining fees will disappear, meaning that miners will likely only make profits from transaction processing fees instead of solving mathematical problems to be rewarded. So far, over 19 million BTC have been mined, and it’s 2140 that we expect to see the token reach its supply limit.
On the other hand, investors might also experience several effects, depending on its long-term evolution. Whether it will function like bars of gold or pocket change 100 years from now is debatable, and you should always make investment decisions using common sense.
If the demand for Bitcoin grows once the supply limit is met, its value will rise, possibly bringing other cryptocurrencies’ prices up, too. In the cryptocurrency world, when Bitcoin’s soaring, its competitors are also rising.
Some crypto-enthusiasts, investors, and analysts are optimistic about Bitcoin’s revival, as 2024 is a year for its halving event. Generally, previous halvings have been linked with price upturns, which fuels the bullish sentiment regarding this cryptocurrency.
What about Ethereum?
With Ethereum, there’s another story. This ecosystem is growing by leaps and bounds as the smart contracts, and decentralised applications (dApps) powered and developed with Ethereum’s platform are rising in popularity. Besides building apps, this technology facilitates transactions, communication, and asset holding, and the myriad areas in which it can find application range from gaming to art to tech.
While Bitcoin and Ethereum are both digital currencies and blockchains, the purpose of the latter is to go beyond just enabling a virtual coin and to deploy dApps and smart contracts without downtime, fraud, or third-party implication, it uses its own programming language.
Regarding its relevancy, Ethereum is used for several main purposes, including: to be traded on exchange platforms, to make payments, to be held as an investment, and to be used on its network to pay transaction fees. If Bitcoin is compared to digital gold because it’s the largest cryptocurrency, Ethereum is regarded as digital silver owing to its wide variety of applications.
Just like its rivals, Ethereum has gone through its struggles, especially last year. Last year, its value dropped by more than 40%, but starting off 2023, it looks like it’s set for gains. On 12 April, and following the Merge, this network will undergo the long-awaited Shanghai update, showing that it is moving ahead and adapting.
As described above, Bitcoin’s halving is expected to take place next year in April. The exact date is unofficial, as the time needed to create new blocks varies. On the other hand, Ethereum is experiencing changes and updates, and while it has already contributed to a greener tomorrow by reducing energy consumption by almost 99.99%, it is set to improve, showcasing the blockchain’s myriad advantages continually.
Whether Bitcoin or Ethereum makes better choices depends on your long-term financial goals and expectations. However, what’s for sure is that they are highly volatile and unpredictable, and you should invest only when you are prepared and informed.