Between them, Bitcoin and Ethereum make up 75% of the
world’s cryptocurrency market. They both run on blockchain, both can be traded
and used to make peer-to-peer payments, and both now have their own
exchange-traded funds, as of earlier this year. However, they have their
inherent differences. Bitcoin is more recognizable and, despite not having the
same utility as Ether, it is the crypto that has posted the most positive
gains.
Bitcoin And Ethereum
Although they are both cryptocurrencies, Bitcoin and
Ethereum are different. They each have their own layer 1 network, and the two
networks aren’t directly compatible. As such, users need a separate Ether and Bitcoin
wallet for Android or other devices. And, when spending or sending
money, the sender must choose the appropriate crypto they are using. Because
they are different, this can also lead to stark differences in price movements.
Bitcoin is the world’s largest cryptocurrency and Ethereum
is the largest altcoin. Between them, they have a total market capitalization
of around $2.4 trillion, which makes up three-quarters of the total crypto
market cap. But, when you compare them side by side, Bitcoin is outperforming
Ether by some margin.
Year-To-Date Price Performance
Since the turn of the year, Bitcoin has seen its price
increase from $42,000 to very nearly $100,000 which is an increase of more than
130%. Ethereum has only posted a 47% increase during the same period – its
price rising from $2,300 at the start of the year to £3,350 in recent days.
While Bitcoin is at its All-Time High (ATH) and looks set to
break strong psychological resistance at $100,000, Ether is down from its ATH
of $4,700 which was posted in November 2021.
First To Market
Bitcoin was the first cryptocurrency, launched in 2009. Its
sole purpose was to facilitate the transfer of value from one person to
another. After a relatively inauspicious start, its popularity grew, and when
its prices started to increase, it gained a lot more media coverage and further
popularity.
Ethereum is actually quite a modern cryptocurrency, with the
likes of Litecoin and even Doge launching before it. And, rather than being a
coin used primarily for value transfer, it is a utility coin. Ether is the
native cryptocurrency that is used to pay for the use of the Ethereum network.
This utility helps underpin Ether’s value and has helped it rise above other
coins, but it doesn’t necessarily make it as appealing as a form of investment.
Bitcoin is Cryptocurrency
Bitcoin is the first coin people think of when they hear the
term cryptocurrency. It was first to market, and it is synonymous with the
industry. When consumers decide they want to invest in crypto for the first
time, it is Bitcoin they are usually considering. This is further fuelled by
the fact that Bitcoin prices are the ones that media outlets talk about.
Recent headlines include the fact that Bitcoin is heading
for $100,000 and not that Ether might top $3,500. Because it’s Bitcoin that
gets all the headlines, this makes new investors all the more likely to turn to
Bitcoin rather than Ether, which means it is BTC prices that experience sharper
rises.
Bitcoin’s value and recognition mean that it is no longer
tied to fundamentals, in the same way gold is not considered a convenient
investment at high levels. The same is true of Bitcoin, especially due to its
high price and its lack of utility.
Name Recognition
A lack of recognition is harming Ether’s chance of posting
the same gains Bitcoin experiences.
Doge has, especially in recent years, gained a lot of
exposure after being shilled by the likes of Snoop Dogg and Elon Musk. This has
become especially pertinent once again, following the recent election. Musk
became Trump’s de facto right-hand man for several rallies, and, following
Trump’s victory has even been named the head of a new government department,
the Department of Government Efficiency (DOGE). This exposure has seen DOGE
post more than double the gains of Bitcoin.
Endorsements
Even during the election run-in, Trump talked about becoming
the crypto President and making the US the cryptocurrency capital of the planet
before floating the idea of using Bitcoin to help eradicate the country’s
national debt. He specifically named Bitcoin in his plans and did not make
mention of Ethereum or any other cryptocurrencies, showing that, despite its
apparent lack of utility, Bitcoin still runs the cryptocurrency roost.
Institutional Investment
Another likely reason that Bitcoin continues to outperform
Ether is the inflow of money from institutional investors. Bitcoin
ETFs were finally launched in January, after years of dispute
between fund managers and the SEC.
This saw billions of dollars of money pour into the funds
and, therefore, into Bitcoin’s stock. Ether ETFs were launched in May. Many
investors expected similar performance, potentially inflating Ether’s price on
the rumors of fund launches, but it never materialized in the same way.
The Emergence of Better Alternatives
Ether is used to establish dApps and smart contracts on the
Ethereum network, but while there has been an influx of new meme coins and
other tokens, projects have opted to use other networks, especially Bitcoin and
Solana.
Solana started the year having just broken the $100
resistance mark. It is now at its all time high of $258, which is a rise of
more than 150% so far this year. Solana is closing in on Tether and if its
market capitalization continues to increase as it has over the rest of the
year, it will likely become the third-largest cryptocurrency behind Bitcoin and
Ether.
Investors also widely expect Solana to be the next
cryptocurrency to be granted its own ETF products. This will likely give it
something of a price boost, although as we saw with Ether, it won’t necessarily
lead to the kind of massive gains that Bitcoin experienced. The problem for
Ethereum is that Solana and other networks are quicker and less expensive to
use, which means developers are more likely to use them.
Expected Changes
For Ethereum to be able to close the gap on Bitcoin’s market
dominance, it needs to gain greater global recognition, not just from within
the crypto industry. It needs to improve its own transaction speeds and costs
to compete with some of the layer 2 networks, and it needs to compete with
other altcoins across a variety of metrics.
Vitalik Buterin, Ethereum’s co-founder, recently said that
one of the next steps in the altcoin’s journey is to reduce transaction time.
Currently, it takes around 15 minutes for a transaction to complete, which can
also cause further lag on the network.
He once again mooted the idea of using
a single-slot finality to help achieve this, while suggesting that
it was also a goal to make Ether more accessible to a wider range of users.
Conclusion
Bitcoin is the cryptocurrency top dog. It was first to
market, has become synonymous with cryptocurrency as a whole, and it has seen
substantial institutional investment following the introduction of Bitcoin ETFs
at the beginning of the year.
Ethereum, on the other hand, is being outclassed by networks
like Solana, although it is promising to ring the changes that will help make
this happen. For now, however, Bitcoin only looks likely to further widen the
gap between it and its closest competitor.